![](media/image1.png){width="0.6666666666666666in"
height="0.6666666666666666in"}4/11/2002

**U.S. Government Aircraft**

**Cost Accounting Guide**

**Developed by**

**The Interagency Committee for Aviation Policy**

**and the**

**General Services Administration**

**Aircraft Management Policy Division**

**Office of Transportation and Personal Property**

**1800 F Street, NW, Washington, DC 20405**

**(202) 208-4101 or 0519**

*Revised November 2002*

**[Table of Contents]{.underline}**

Chapter 1.0 **Introduction**

Chapter 2.0 **Government Aircraft Cost Accounting Requirements**

1.  Reporting Government Aircraft Costs

    1.  Federal Aviation Interactive Reporting System (FAIRS)

    2.  Federal Agencies' Accounting Systems

2.2 Accounting for Government Aircraft Costs (OMB Circular A-126)

> 2.1.1 Justifying Use of Aircraft to Support Travel
>
> 2.1.2 Recovering the Cost of Operations When Appropriate
>
> 2.1.3 Determining Aircraft Program Cost-Effectiveness

2.3 Justifying Acquisition and In-House Operation of Aircraft

> (OMB Circular A-76)
>
> 2.4 Federal Government Aircraft Cost Elements

Chapter 3.0 **A Standard Government Aircraft Cost Accounting System,**

**Based on a 'Chart of Accounts'**

1.  Federal Standard General Ledger System (SGL) (Chart of Accounts)

> 3.1.1 Collection of Statistical Data

3.2 Setting Up the Chart of Accounts

3.2.1 Sample Chart of Accounts

3.3 Expanding and Changing the Chart of Accounts

3.3.1 Expansion of Account Numbering System

3.3.2 Spacing of Accounts

3.4 Maximizing Accounting Flexibility by Expanding the

Chart of Accounts

3.4.1 Accounting for Costs by Aircraft

3.4.2 Accounting for Costs by Object Class Codes

3.4.3 Accounting for Costs by Work Order Number

> 3.4.4 Other Possibilities

3.5 Sample Chart of Accounts Definitions

> (Based on Federal Government Cost Elements)

3.6 CAG Correlation Matrix

Appendix A Accounting Overview

Appendix B Forms

Appendix C Reports

Appendix D FAIRS Data Element Definitions

Appendix E OMB Circular A-126 Cost Element Definitions

Appendix F OMB Circular A-76 Cost Element Definitions

Appendix G U.S. Standard General Ledger Chart of Accounts

Appendix H Additional Sources of Information

**1.0 INTRODUCTION**

The purpose of this U.S. Government Aircraft Cost Accounting Guide (CAG)
is two-fold:

-   To assist Federal agencies in implementing an accounting system to
    collect, analyze, and report cost data related to operating
    aircraft.

-   To give agencies direction on how to employ the cost data they
    collect to justify the use of aircraft to support travel, recover
    the cost of operating aircraft on behalf of others, justify the
    acquisition and in-house operation of aircraft, and determine
    aircraft program cost-effectiveness, as required by 41 Code of
    Federal Regulations 102-33 and mandated by Office of Management and
    Budget (OMB) Circulars A-126 and A-76.

If properly implemented, the cost accounting system described in this
guide can become a valuable tool to help aviation managers make sound
decisions for acquiring, managing, and disposing of aircraft.

This CAG adopts widely accepted aviation cost accounting practices and
incorporates guidance contained in Attachments A and B of OMB Circular
A-126 (revised May 1992). An accounting system developed following the
guidance in this CAG will enable Federal agencies to report to the
Federal Aviation Interactive Reporting System (FAIRS), do the
calculations necessary to comply with other direction in 41 Code of
Federal Regulations 102-33 and OMB Circulars A-126 and A-76, and produce
financial statements (balance sheets, income/expense statements, and
cash flow statements) as well as various management reports.

In addition, this CAG shows how the financial information generated by
the proposed accounting system would correlate with the U.S.
Government's existing Object Class Code system of budgeting as well as
with the U.S. Government Standard General Ledger (SGL) System of
accounting.

Intended users of this guide include aviation managers in Federal
agencies, as well as accounting, finance, and acquisition personnel of
any Federal agency that operates aircraft in support of its assigned
function. To implement the accounting system described in this CAG will
require the use of trained financial and accounting personnel. This
guide is therefore designed to do the following:

-   Assist Federal managers in understanding and complying with the
    required processes,

-   Give guidance to Federal finance and accounting personnel in
    establishing and operating the accounting system, and

-   Facilitate communication between program management, accounting, and
    finance staffs by establishing a common base of understanding.

2.  **GOVERNMENT AIRCRAFT COST ACCOUNTING**

> **REQUIREMENTS**

OMB Circular A-126 directs the General Services Administration (GSA) and
the Federal agencies to minimize costs and improve the management and
use of Government aviation resources. The circular prescribes cost
accounting guidance that Federal agencies must follow in acquiring,
managing, and disposing of aircraft.

Also through Circular A-126, OMB has charged GSA with specific
responsibilities:

-   Operating a Government-wide aircraft management information system,

-   Developing generic aircraft information systems standards and
    software,

-   Providing technical assistance to agencies in establishing automated
    aircraft information and cost accounting systems and conducting the
    cost analyses required by Circular A-126,

-   Providing statistical reports and studies related to the information
    collected through the Government-wide management information system.

In 41 Code of Federal Regulations 102-33, "Management of Government
Aircraft," GSA (with advice from the Federal agencies) has codified the
direction contained in OMB Circular A-126. 41 CFR 102-33 directs Federal
agencies to report cost information through the Federal Aviation
Interactive Reporting System (FAIRS).

OMB Circular A-76, "Performance of Commercial Activities," directs
Federal agencies to compare the costs of owning and operating aircraft
with the costs of hiring aircraft as commercial aviation services (CAS).

1.  **Reporting Government Aircraft Costs**

    1.  Federal Aviation Interactive Reporting System (FAIRS)

To comply with direction in OMB Circular A-126, GSA has developed the
Federal Aviation Interactive Reporting System (FAIRS) to collect and
analyze data on the inventories, cost, and usage of Government aircraft.
**Government aircraft** are (1) **Federal aircraft** (i.e., owned,
borrowed, loaned, or bailed) or are (2) **aircraft hired as commercial
aviation services (CAS)** (i.e., leased, lease-purchased, rented,
chartered, hired under full service contracts, or hired under
inter-service support agreements).

The Federal agencies that are members of the Interagency Committee for
Aviation Policy (ICAP) worked closely with GSA to develop the data
elements, functional specifications, and business rules for FAIRS. FAIRS
is a highly secure, Internet-based system that consists of a basic
application for entering and approving data, an Oracle database to store
the data, and a powerful query tool that allows users to retrieve and
analyze data from the database.

Through the basic FAIRS application, agencies report on their Federal
aircraft inventories and the cost, missions, and flying hours (i.e.,
hours flown) of their Federal aircraft as well as the cost, missions,
and flying hours of aircraft they hire as commercial aviation services
(CAS). The FAIRS business rules establish the frequency and format for
this reporting.

FAIRS cost data elements are defined in Appendix D. **The Cost
Accounting Guide (CAG) Correlation Matrix on page 24-A shows the
relationships among the elements as defined in FAIRS, Circulars A-76 and
A-126, and the Chart of Accounts**.

2.1.2 Federal Agencies' Accounting Systems

The quality of the data collected in FAIRS is a direct reflection of the
quality of the reporting agencies' cost accounting and statistical data
gathering. To report to FAIRS accurately and completely, Federal
agencies need their own accounting systems that can track costs by
model, tail number, location, and contract assignment. They need
accounting systems that are based on standard accounting principles and
concepts and that are automated to facilitate handling the large
quantities of data involved. The model accounting system described in
this guide incorporates standard accounting practices, is applicable to
any Government organization because it is based on the U.S. Government
Standard General Ledger System (SGL), and should fulfill agencies' needs
for reporting and management information.

Central to any accounting system is the use of a set of definitions for
financial elements and a Chart of Accounts that groups and assigns a
number to each asset, liability, cost element, and sub-element. The
elements are selected and defined by each operator in such a way that
they:

-   Cover all areas of asset, liability, owner\'s equity, expense, and
    revenue for that operator,

-   Can be collected without undue difficulty by that operator,

-   Provide the basis for generating the required reports in the
    required format.

This guide recommends a set of Federal Government Aircraft Cost Elements
(see Section 2.4), a standard Chart of Accounts (see Section 3.2.1) and
shows how that Chart of Accounts can be expanded as required for
different types of operations. The guide also identifies how agencies
can obtain needed data through the use of standard forms (see Appendix
C). The forms are also available in Excel format for incorporation in a
digital data collection system.

Because no two aviation operations are identical, this guide focuses on
underlying principles, and the model system based on these principles
can be adapted. The concepts and approaches are applicable to any sized
operation regardless of how many aircraft, operating locations, and
contracts are involved. Management and accounting personnel will have to
work together to adapt the system described in this CAG to meet the
needs of their operation. The key to a successful accounting system is
first to define what output is required and then work backwards from
that point to ensure that the system has the right input to produce the
required output.

**2.2 Accounting for Government Aircraft Costs (OMB Circular A-126)**

Federal agencies need accounting systems whose output helps them comply
with the requirements in OMB Circular A-126. Circular A-126 directs
Federal agencies to accumulate the costs associated with their aircraft
programs and use those costs to do the following: (1) justify the use of
Government aircraft in lieu of commercially available aircraft to
support travel, and the use of one Government aircraft in lieu of
another to support travel; (2) recover the costs of operating Government
aircraft, when appropriate; (3) determine the cost-effectiveness of
various aspects of Federal agencies' aircraft programs; and (4) conduct
the cost comparisons required by OMB Circular A-76.

Agencies should use the Federal Government Aircraft Cost Elements
defined in this CAG (see section 2.4) to comply with these requirements,
as described in detail below.

2.2.1 Justifying the Use of Aircraft to Support Travel

Before authorizing the use of a Government aircraft to support travel,
on a trip-by-trip basis, Federal agencies must compare the costs of
using a Federal aircraft (if applicable), a CAS aircraft, and scheduled
airline service (if available) and select the most advantageous
alternative for the trip.

Agencies that propose to use their Government aircraft to support
recurring travel between locations are encouraged to develop standard
trip cost justifications. These justifications should summarize the
projected costs of using Government aircraft and scheduled airlines
between those locations. The justifications should also show comparative
costs for varying passenger loads. Agencies that choose this approach
would be able to see at a glance the minimum number of official
travelers needed to justify the use of a particular aircraft or aircraft
type for a trip between locations.

Cost comparisons must be calculated as follows:

> [Federal aircraft trip cost]{.underline}: the projected hourly cost
> times the number of hours flown for the trip.
>
> *[Projected hourly cost]{.underline} is the variable cost of operating
> the aircraft for the past 12 months, adjusted for inflation (as
> prescribed in OMB Circular A-76) and for any known upcoming cost
> changes over the next 12 months, divided by the projected hours flown
> for the aircraft for the next 12 months.*
>
> *[Hours flown]{.underline} are calculated as the elapsed time from
> takeoff to landing for each trip flown during the year.*
>
> Agencies should develop a projected hourly cost for each of their
> Federal aircraft at the beginning of each fiscal year.
>
> The specific components of what constitutes the "variable cost" are as
> follows (see information on these Federal Government Aircraft Cost
> Elements in Section 2.4):
>
> Variable Crew Costs
>
> Scheduled and Unscheduled Maintenance Labor -- Variable
>
> Scheduled and Unscheduled Maintenance Parts -- Variable
>
> Scheduled Maintenance Contract Out -- Variable

Scheduled Engine Overhaul, Refurbishment, Major Comp. Repair---

Variable

> Fuel, Other Fluids, Oxygen
>
> Variable Lease Costs
>
> Flight Support
>
> Ground Servicing
>
> [CAS aircraft trip cost]{.underline}**:** the amount that the agency
> will be charged for the trip by the organization that provides the
> aircraft. If another Federal agency provides the aircraft at no
> charge, the comparison number to use is the owning agency's Federal
> aircraft cost as defined above (i.e., projected hourly cost times the
> number of hours flown for the trip).
>
> [Commercial airline service cost]{.underline}**:** for all official
> travelers only (do not include costs for space available passengers in
> this calculation), the sum of the current Government contract fare (or
> the lowest fare available) for the trip in question plus the costs of
> any [additional]{.underline} (i.e., beyond what is required for travel
> on Federal or CAS aircraft) ground or air travel, per diem,
> miscellaneous related costs (e.g., taxis, parking, etc.), and any lost
> work time (computed at gross hourly costs to the Government, including
> benefits). Travel by Federal or CAS aircraft is presumed to be the
> baseline against which the use of commercial airline travel is
> measured.

2.2.2 Recovering the Cost of Operations When Appropriate

Under the Economy Act of 1932, as amended (31 USCS 1535) and various
acts appropriating funds or establishing working funds to operate
aircraft, Federal agencies are required to recover the costs of
operating their aircraft for use by other Federal agencies, other
governments (e.g., state, local, or foreign), or non-official travelers.
Depending on the statutory authorities under which an agency acquired or
operates an aircraft, that agency may use either of two methods for
establishing the rates charged for using its aircraft:

> [Variable Cost Recovery Rate]{.underline}: This is the same as the
> Federal Aircraft Trip Cost in Section 2.2.1 above (Justifying the Use
> of Government Aircraft for Travel). If an agency decides to base the
> charge for using its aircraft solely on this rate, it must recover any
> associated fixed costs separately from the appropriation that supports
> the mission for which the procurement of the aircraft was justified.
> As stated, the variable costs are as discussed above. The fixed costs
> are as follows (see information on the Federal Government Aircraft
> Cost Elements shown in Section 2.4):
>
> Fixed Crew Costs
>
> Scheduled (Calendar) Maintenance Labor \-- Fixed
>
> Scheduled (Calendar) Maintenance Parts -- Fixed
>
> Scheduled (Calendar) Maintenance Refurb \-- Fixed
>
> Scheduled (Calendar) Maintenance Contract Out -- (Fixed)
>
> Fixed Lease Costs
>
> Operations Overhead
>
> Administrative Overhead
>
> Insurance Premium Costs (or Self-Insurance Costs)
>
> Depreciation

[Full Cost Recovery Rate:]{.underline} This includes

> Fixed costs directly attributable to the aircraft or aircraft type and
> adjusted for inflation, as prescribed in OMB Circular A-76, and for
> any known upcoming cost changes
>
> *plus* any insurance premium costs (or self-insurance costs) and
> annual depreciation or replacement costs
>
> *plus* operations and administrative overhead allocated to the
> aircraft or aircraft type based on the percentage of annual flying
> hours projected for the aircraft or aircraft type
>
> *divided* by the annual hours flown projected for the aircraft or
> aircraft type
>
> *then add to the result* the Variable Cost Recovery Rate
>
> *then multiply that result by* the estimated number of hours flown for
> the trip.

So, Full Cost Recovery Rate =

Allocated

Hours flown (Var Cost RR + [Adj Fixed Costs + Insur+ AnnDeprec + Ops &
Admin Overhead)]{.underline}

> For trip Projected Annual Hours Flown
>
> See Appendices D, E, and F for definitions and the CAG Correlation
> Matrix on page 24-A for correlation with the Chart of Accounts.

2.2.3 Determining Aircraft Program Cost-Effectiveness

Although cost data are not the only measures of effectiveness of a
Federal agency's aircraft program, they can be very useful in
identifying opportunities to reduce aircraft operational costs. These
opportunities might include changing maintenance practices, purchasing
fuel at lower costs, and the replacement of old, inefficient aircraft
with aircraft that are more fuel-efficient and have lower operations and
maintenance costs.

The most common measures used to evaluate the cost-effectiveness of
various aspects of an aircraft program are expressed as the cost per
flying hour or per passenger mile for certain types of aircraft costs.
These measures include, but are not limited to maintenance costs/flying
hour; fuel and other fluids cost/flying hour; accident repair
costs/flying hour (or per aircraft); and variable cost per passenger
mile. Agencies should use the Federal Government Aircraft Cost Elements
(see Section 2.4) to develop their own cost-effectiveness measures.

**2.3** **Justifying Acquisition and In-House Operation of Aircraft**

**(OMB Circular A-76)**

OMB Circular A-76, "Performance of Commercial Activities" requires
Federal agencies to conduct cost comparisons of commercial activities
they perform and, where appropriate, to determine the most economical
way to perform the work---whether by private commercial source or using
in-house Government resources. The guidelines for conducting these cost
comparisons for aircraft are presented in Supplement 6 (Aviation
Competitions) to the circular. The A-76 cost element definitions are
included in Appendix F of this CAG. Circular A-76 can also be obtained
at the OMB website:
[www.whitehouse.gov/omb/circulars/](http://www.whitehouse.gov/omb/circulars/).

4.  **Federal Government Aircraft Cost Elements**

Following is a listing of the Federal Government Aircraft Cost Elements,
which include all the cost elements required by FAIRS as well as other
costs that agencies need to accumulate. These Federal Government
Aircraft Cost Elements are generally the same as the cost data elements
in FAIRS and follow FAIRS' definitions (see Appendix D). However, some
of the elements that agencies need to collect are not captured in FAIRS.
The tables below cross-reference the Federal Government Aircraft Cost
Elements to the specific requirements in FAIRS and OMB Circulars A-126
and A-76. (Also, see the CAG Correlation Matrix on page 24-A for a
cross-reference that includes the Chart of Accounts. Definitions for
A-126 and A-76 elements are in Appendices E and F, respectively.)

**The Federal Government Aircraft Cost Element matrix** is divided into
four sections, as follows:

VARIABLE COSTS: The variable costs of operating aircraft are those costs
that vary depending on how much the aircraft are used. For instance,
variable maintenance costs include unscheduled maintenance costs and
costs of maintenance scheduled on the basis of actual flying time
because these vary with aircraft usage:

VARIABLE COSTS:

+------------------------+-------+---------------------+--------------+
| ## Federal Government  | ##    | **Needed for Cost   | **Needed for |
|                        | Neede | Comparisons**       | A-76         |
| ##                     | d to  |                     | C            |
| Aircraft Cost Elements | Repor | **(A-126)**         | alculation** |
|                        | t to  |                     |              |
|                        | FAIRS |                     |              |
+------------------------+-------+---------------------+--------------+
| ## Varia               | ## X  | X (Crew Costs       | X (2, 19g)   |
| ble Crew -- Commercial | (101) | Variable)           |              |
+------------------------+-------+---------------------+--------------+
| ## Va                  | ## X  | X (Crew Costs       | X (2, 19g)   |
| riable Crew -- Federal | (102) | Variable)           |              |
+------------------------+-------+---------------------+--------------+
| ## Sched Maintena      | ## X  | X (Maint Labor      | X (5a)       |
| nce Labor\--Commercial |  (87) | Variable)           |              |
+------------------------+-------+---------------------+--------------+
| ## Sched Maint         | ## X  | X (Maint Labor      | X (5a)       |
| enance Labor---Federal |  (88) | Variable)           |              |
+------------------------+-------+---------------------+--------------+
| #                      | ## X  | X (Maint Labor      | X (5a)       |
| # Unsched Maint & Repa |  (97) | Variable)           |              |
| irs Labor---Commercial |       |                     |              |
+------------------------+-------+---------------------+--------------+
| ## Unsched Maint & R   | ## X  | X (Maint Labor      | X (5a)       |
| epairs Labor---Federal |  (98) | Variable)           |              |
+------------------------+-------+---------------------+--------------+
| ## Sched Maintena      | ## X  | X (Maint Parts      | X (5b)       |
| nce Parts---Commercial |  (89) | Variable)           |              |
+------------------------+-------+---------------------+--------------+
| ## Sched Maint         | ## X  | X (Maint Parts      | X (5b)       |
| enance Parts---Federal |  (90) | Variable)           |              |
+------------------------+-------+---------------------+--------------+
| ## Unsched Maint & Rep | ## X  | X (Maint Parts      | X (5b)       |
| airs Part---Commercial |  (99) | Variable)           |              |
+------------------------+-------+---------------------+--------------+
| ## Unsched Maint &     | ## X  | X (Maint Parts      | X (5b)       |
| Repairs Part---Federal | (100) | Variable)           |              |
+------------------------+-------+---------------------+--------------+
| ## Sched Maint Con     | ## X  | X (Maint Contracts  | X (5c)       |
| tract Out---Commercial |  (83) | Variable)           |              |
+------------------------+-------+---------------------+--------------+
| ## Sched Maint         | ## X  | X (Maint Contracts  | X (5c)       |
| Contract Out---Federal |  (84) | Variable)           |              |
+------------------------+-------+---------------------+--------------+
| ## Sched Maint Engine  | ## X  | X (Eng Overhaul,    | X (5d, e)    |
|  Overhaul---Commercial |  (85) | Refurb, Major       |              |
|                        |       | Component Repair)   |              |
+------------------------+-------+---------------------+--------------+
| ## Sched Maint Eng     | ## X  | X (Eng Overhaul,    | X (5d, e)    |
| ine Overhaul---Federal |  (86) | Refurb, Major       |              |
|                        |       | Component Repair)   |              |
+------------------------+-------+---------------------+--------------+
| ## Sched Mai           | ## X  | X (Eng Overhaul,    | X (5d, e)    |
| nt Refurb---Commercial |  (91) | Refurb, Major       |              |
|                        |       | Component Repair)   |              |
+------------------------+-------+---------------------+--------------+
| ## Sched               | ## X  | X (Eng Overhaul,    | X (5d, e)    |
| Maint Refurb---Federal |  (92) | Refurb, Major       |              |
|                        |       | Component Repair)   |              |
+------------------------+-------+---------------------+--------------+
| ## Sched Maint         | ## X  | X (Eng Overhaul,    | X (5d, e)    |
|  TBO Comp---Commercial |  (93) | Refurb, Major       |              |
|                        |       | Component Repair)   |              |
+------------------------+-------+---------------------+--------------+
| ## Sched Ma            | ## X  | X (Eng Overhaul,    | X (5d, e)    |
| int TBO Comp---Federal |  (94) | Refurb, Major       |              |
|                        |       | Component Repair)   |              |
+------------------------+-------+---------------------+--------------+
| ## Fuel---Commercial   | ## X  | X (Fuel and Other   | X (1, 19j)   |
|                        |  (40) | Fluids)             |              |
+------------------------+-------+---------------------+--------------+
| ## Fuel---Federal      | ## X  | X (Fuel and Other   | X (1, 19j)   |
|                        |  (41) | Fluids)             |              |
+------------------------+-------+---------------------+--------------+
| ##                     | ## X  | X (Fuel and Other   | X (1, 19j)   |
| Lubricant---Commercial |  (56) | Fluids)             |              |
+------------------------+-------+---------------------+--------------+
| ## Lubricant---Federal | ## X  | X (Fuel and Other   | X (1, 19j)   |
|                        |  (57) | Fluids)             |              |
+------------------------+-------+---------------------+--------------+
| ## Oxygen---Commercial | ## X  | X (Fuel and Other   | X (1)        |
|                        |  (69) | Fluids)             |              |
+------------------------+-------+---------------------+--------------+
| ## Oxygen---Federal    | ## X  | X (Fuel and Other   | X (1)        |
|                        |  (70) | Fluids)             |              |
+------------------------+-------+---------------------+--------------+
| ## Variable L          | ## X  | X (Lease Costs      | X (3, 18)    |
| ease Cost---Commercial | (103) | Variable)           |              |
+------------------------+-------+---------------------+--------------+
| ## Variabl             | ## X  | X (Lease Costs      | X (3, 18)    |
| e Lease Cost---Federal | (104) | Variable)           |              |
+------------------------+-------+---------------------+--------------+
| ## Fligh               | ## X  | X (Landing & Tie    | X (4, 19i)   |
| t Support---Commercial |  (38) | Down Fees)          |              |
+------------------------+-------+---------------------+--------------+
| ## Fl                  | ## X  | X (Landing & Tie    | X (4, 19i)   |
| ight Support---Federal |  (39) | Down Fees)          |              |
+------------------------+-------+---------------------+--------------+
| ## Ground              | ## X  | X (Landing & Tie    | X (19f)      |
| Servicing---Commercial |  (42) | Down Fees)          |              |
+------------------------+-------+---------------------+--------------+
| ## Grou                | ## X  | X (Landing & Tie    | X (19f)      |
| nd Servicing---Federal |  (43) | Down Fees)          |              |
+------------------------+-------+---------------------+--------------+

FIXED COSTS: The fixed costs of operating aircraft are those that result
from owning and support of the aircraft and that do not vary according
to aircraft usage. These include maintenance and inspection costs that
are incurred on a calendar basis, as well as the cost of maintenance
labor that is not incurred as a result of specific maintenance actions
on specific aircraft:

+-----------------------+-------+---------------------+--------------+
| #                     | ##    | **Needed for Cost   | **Needed for |
| # Federal Government  | Neede | Comparisons**       | A-76         |
|                       | d to  |                     | C            |
| ## A                  | Repor | **(A-126)**         | alculation** |
| ircraft Cost Elements | t to  |                     |              |
|                       | FAIRS |                     |              |
+-----------------------+-------+---------------------+--------------+
| Fixed                 | X     | X (Crew Costs       | X (9, 19b)   |
| Crew---Commercial     | (34)  | Fixed)              |              |
+-----------------------+-------+---------------------+--------------+
| Fixed Crew-Federal    | X     | X (Crew Costs       | X (9, 19b)   |
|                       | (35)  | Fixed)              |              |
+-----------------------+-------+---------------------+--------------+
| Sched (Calendar)      | X     | X (Maint Labor      | X (10a)      |
| Maint                 | (77)  | Fixed)              |              |
| Labor---Commercial    |       |                     |              |
+-----------------------+-------+---------------------+--------------+
| Sched (Calendar)      | X     | X (Maint Labor      | X (10a)      |
| Maint Labor---Federal | (78)  | Fixed)              |              |
+-----------------------+-------+---------------------+--------------+
| Sched (Calendar)      | X     | X (Maint Parts      | X (10b)      |
| Maint                 | (79)  | Fixed)              |              |
| Parts---Commercial    |       |                     |              |
+-----------------------+-------+---------------------+--------------+
| Sched (Calendar)      | X     | X (Maint Parts      | X (10b)      |
| Maint Parts---Federal | (80)  | Fixed)              |              |
+-----------------------+-------+---------------------+--------------+
| Sched (Calendar)      | X     | X (Maint Contracts  | X (10c, 19c) |
| Maint Contract        | (81)  | Fixed)              |              |
| Out---Comm            |       |                     |              |
+-----------------------+-------+---------------------+--------------+
| Sched (Calendar)      | X     | X (Maint Contracts  | X (10c, 19c) |
| Maint Contract        | (82)  | Fixed)              |              |
| Out---Federal         |       |                     |              |
+-----------------------+-------+---------------------+--------------+
| Sched (Calendar)      | X     | X (Maint Costs      | X (5d,e)     |
| Maint Refurb\-\--Comm | (106) | Fixed)              |              |
+-----------------------+-------+---------------------+--------------+
| Sched (Calendar)      | X     | X (Maint Costs      | X (5d,e)     |
| Maint                 | (107) | Fixed)              |              |
| Refurb---Federal      |       |                     |              |
+-----------------------+-------+---------------------+--------------+
| Fixed                 | X     | X (Lease Costs      | X (11, 19a)  |
| Lease---Commercial    | (36)  | Fixed)              |              |
+-----------------------+-------+---------------------+--------------+
| Fixed Lease---Federal | X     | X (Lease Costs      | X (11, 19a)  |
|                       | (37)  | Fixed)              |              |
+-----------------------+-------+---------------------+--------------+
| Operations Overhead   | X     | X (Operations       | X (14, 20)   |
| Cost                  | (65)  | Overhead)           |              |
+-----------------------+-------+---------------------+--------------+
| Other Commercial      | X     | X (Operations       | X (14, 20)   |
| Costs                 | (66)  | Overhead            |              |
+-----------------------+-------+---------------------+--------------+
| Other Federal Costs   | X     | X (Operations       | X (14, 20)   |
|                       | (66)  | Overhead            |              |
+-----------------------+-------+---------------------+--------------+
| Administrative        | X (8) | X (Administrative   | X (14)       |
| Overhead Cost         |       | Overhead)           |              |
+-----------------------+-------+---------------------+--------------+
| Insurance Premium     | X     |                     |              |
| Cost                  | (52)  |                     |              |
+-----------------------+-------+---------------------+--------------+
| Self-Insurance Cost   |       | X (Self-Insurance   | X (13)       |
|                       |       | Cost)               |              |
+-----------------------+-------+---------------------+--------------+
| Litigation Settlement | X     |                     |              |
| Cost                  | (55)  |                     |              |
+-----------------------+-------+---------------------+--------------+
| Depreciation          |       | X (Depreciation)    | X (12)       |
+-----------------------+-------+---------------------+--------------+

MISCELLANEOUS COSTS: Agencies should record certain other costs of their
aircraft, including the cost of acquisition and modification. These
costs are used in the calculations required by Circulars A-126 and A-76:

+---------------------+---------+-------------------+----------------+
| ##                  | ## Need | **Needed for Cost | **Needed for   |
| Federal Government  | ed to R | Comparisons**     | A-76           |
|                     | eport t |                   | Calculation**  |
| ## Air              | o FAIRS | **(A-126)**       |                |
| craft Cost Elements |         |                   |                |
+---------------------+---------+-------------------+----------------+
| Accident Repair     |         | X (Accident       |                |
| Costs               |         | Repair Costs)     |                |
+---------------------+---------+-------------------+----------------+
| Acquisition Value   | X (6)   | X (Aircraft Cost) | X (19d, e)     |
+---------------------+---------+-------------------+----------------+
| Modification Cost   | X (62)  | X (Aircraft Cost) | X (19d, e)     |
+---------------------+---------+-------------------+----------------+
| Cost of Capital     |         | X (Cost of        | X (15)         |
|                     |         | Capital)          |                |
+---------------------+---------+-------------------+----------------+

OTHER REQUIRED DATA: Certain other, non-cost data must also be recorded
(such as hours flown) to assist with the analysis of aviation
operations.

3.  **A STANDARD GOVERNMENT AIRCRAFT COST ACCOUNTING**

    **SYSTEM, BASED ON A 'CHART OF ACCOUNTS'**

The **chart of accounts** is a systematic listing of all accounts used
by the organization. The chart of accounts helps to organize the
accounting records of an organization and to ensure consistent reporting
of similar transactions.

It is impossible to forecast future needs beyond perhaps one or two
years. It is therefore important to set up an accounting system that has
as much flexibility as possible so that it can support all management
levels within the organization and change as the organization grows. In
practical terms, this means it is worthwhile to set up a system that has
significantly more capability than needed at present. The chart of
accounts is the place where flexibility can be built into your
accounting system.

Generally, the accounts on a chart of accounts are grouped by type in
order of their appearance on the organization\'s financial statements.
The first digit of the account number will indicate the major heading of
the account (for example, any asset account usually begins with a \"1\";
a \"2\" normally indicates liabilities). The second digit of the account
number normally indicates the major account within a heading (for
example, \"11\" is a cash asset account). The third digit in the account
number indicates the sub account within the major account
classification. The account numbers 111 and 112 could represent cash
assets on hand in bank A and bank B. In this manner, the subsidiary
accounts can be \"rolled up\" into their major accounts and the major
accounts can be \"rolled up\" into their proper headings.

**3.1 Federal Standard General Ledger System (SGL) (Chart of Accounts)**

Below are sections taken directly from the SGL and which explain its
background and objectives.

**Background**:

> In early 1984, an interagency group was formed at the direction of the
> Office of Management and Budget (OMB) under the leadership of the
> Department of Transportation. OMB tasked the interagency group to
> develop a standard general ledger chart of accounts for
> Government-wide use by modifying the currently existing Department of
> Defense Uniform Chart of Accounts. The criteria provided by OMB to the
> interagency group was that the standard general ledger chart of
> accounts should:

-   Provide control over all financial transactions and resource
    balances,

-   Satisfy basic OMB and Treasury reporting requirements (Program and
    Financing Report, Budget Execution Report, and related Treasury
    Reports), and

-   Integrate proprietary and budgetary accounting.

    **Purpose and Scope**:

This standard general ledger is intended to be complete at a high level.
All Federal agency transactions and resource balances will generally be
captured in the accounts provided or in subsidiary accounts that roll up
to the accounts provided.

The purpose of the U.S. Government Standard General Ledger is to provide
a uniform chart of accounts and supporting transactions to be used to
standardize federal agency accounting and to support the preparation of
standard external reports.

The U.S. Government Standard General Ledger includes accounts and
transactions, which can be incorporated into individual agency general
ledger systems. The accounts presented meet the basic financial
statement and budget execution reporting requirements of departments and
agencies. *[All agencies within the government will not need to use all
of the general ledger accounts provided. Only those accounts that are
applicable should be used in a given situation. Likewise, the
transactions provided do not include all transactions that may occur in
an agency]{.underline}*. The U.S. Government Standard General Ledger
provides agencies the flexibility to establish such sub accounts and
transactions as necessary.

**The Chart of Accounts**:

The chart of accounts provides the basic structure of the U.S.
Government Standard General Ledger. It incorporates both the traditional
proprietary accounts and budgetary accounts. Both the proprietary and
budgetary sections are self-balancing within themselves. A four-digit
account numbering system has been provided using the following basic
structure:

1000 Assets,

2000 Liabilities,

3000 Equity,

4000 Revenue (Budgeted),

5000 Revenue (Other),

6000 Expenses, and

7000 Gains, Losses and Extraordinary Items.

Agencies may expand this numbering system to as many digits as are
needed to accommodate agency specific needs with the provision that any
expansion continues to roll-up to the basic account structure provided.
The chart of accounts does not include statistical or memorandum
accounts as these accounts are primarily agency specific. For
consistency, it is recommended that the agencies use the 90000 series
for their statistical/memorandum accounts.

**3.1.1 Collection of Statistical Data**

Much of the information needed for the effective management of aircraft
is based on the usage of each aircraft. This statistical data along with
the costs on each aircraft, or major component of an aircraft, allows
the manager to determine the cost per hour one needs to charge to break
even on the Income Statement. This cost per hour is often the rate
needed to do a quick review of outside resources to ensure that the
Government rate is in line with what the private sector would charge for
the same or equal service. Also, most of the required upward (GSA, and
OMB) reporting demands that hours, by individual aircraft, be maintained
(i.e., hours flown or block-to-block).

The entry of the hours flown in the 90000 series accounts could, and
probably should, be the data that causes the generation of the hours
revenues information required for the 52000 (Revenue) series accounts.

**3.2 Setting Up the Chart of Accounts**

The standard accounts and sub accounts contained in the SGL are the
basis for the chart of accounts illustrated in this cost accounting
guide. Each agency needs to expand these accounts and sub accounts in
order to meet its reporting and management requirements. When agencies
begin setting up their own charts of accounts, they should consider
consulting the SGL because it contains a great deal of information
regarding basic accounts and transactions.

A complete copy of the SGL account number account summary may be
obtained by contacting:

Department of the Treasury

Financial Management Service

Liberty Center (UCP 734)

401 14th Street, SW

Washington, DC 20227

(Tel: (202) 208-1751

Alternatively, the information can be obtained at the Department of the
Treasury website:
[www.fms.treas.gov/ussgl/](http://www.fms.treas.gov/ussgl/)

3.2.1 Sample Chart of Accounts

A sample chart of accounts supporting most aspects of a typical aviation
operation is illustrated in this section. The basis for this chart of
accounts is the SGL. Every attempt has been made to match the typical
aviation operation chart of accounts and the SGL chart of accounts.
Accounts and sub accounts that are the same in both are shown in bold.

The chart of accounts shown on the following pages can be used as a
model no matter what the size of the operation. Agencies with many
aircraft, locations, etc., may have more sub account numbers. They will
also have a decimal system with additional digits to distinguish between
aircraft, locations, and contracts; however, the basic accounts and sub
accounts will not change. The illustrated chart of accounts offers the
greatest detail for expense items (account 60000) because OMB cost
comparisons and FAIRS focus primarily on the reporting of expenses. In
other areas, detail is shown where an aviation operation will have a
specific expense or income. The chart of accounts shown can be expanded
in other areas, as required, using the SGL as a guide. Note that an
agency has a great deal of latitude in assigning account numbers to
account descriptions. If the aviation accounting system is internally
complex or resides as a subset of accounts in a general accounting
system, compound account numbers may be necessary for data processing.
***[The numbers assigned to the accounts in this guide are for
illustration purposes only and do not dictate the form or format for
account numbers in any particular agency.]{.underline}***

On the following chart of accounts, the letters "P" and "S" are used to
denote the type of account for each account number. An account number
marked with a "P" means that it is a "posting" account and data can be
entered ("posted") into that account number. If the account number is
marked with an "S" it means that it is a "summary" account that sums the
cost data in one or more sub-accounts.

**SAMPLE CHART OF ACCOUNTS - AVIATION OPERATION**

Account Account Description Type of Normal

[Number Account Balance]{.underline}

Note: \"S\" denotes a summary account. \"P\" denotes a posting account.

\"CR\" = Credit, \"DR\" = Debit, \"DC\" = Debit or Credit

Items in **Bold** correspond directly to the same item on the US
Government Standard General Ledger

**10000 Assets**

**10100 Fund Balance with Treasury (Cash)** P DR

**13100 Accounts Receivables** P DR

**15000 Inventories** S DR

15100 Inventory for Agency Operations S DR

15110 Fuel P DR

15120 Parts P DR

**17000 Fixed Assets (Property, Plant & Equip)** S DR

**17300 Buildings, Improvements & Renovations** P DR

**17390 Accumulated Depreciation** P CR

**17400 Other Structures and Facilities** P DR

**17490 Accumulated Depreciation** P CR

**17500 Equipment** S DR

17510 Aircraft P DR

17520 Aircraft Modifications P DR

17530 Equipment Other Than Aircraft P DR

**17590 Accumulated Depreciation** P CR

**18100 Assets Under Capital Lease** S DR

18110 Aircraft P DR

18120 Other Assets P DR

**18190 Accumulated Depreciation** P CR

**20000 Liabilities**

**21000 Accrued Liabilities - Other** S CR

**21100 Accounts Payable P CR**

**21140 Interest Payable P CR**

21500 Reserves S CR

21510 Engine Overhaul Reserve P CR

21520 Aircraft Refurbishment Reserve P CR

21530 Major Comp. Rebuild/Overhaul Reserve P CR

21540 Life Limited Item Reserve P CR

**22100 Accrued Liabilities Funded**

**Payroll and Leave** P CR

**23100 Unearned Revenues - Advance from Others** P CR

**29000 Other Liabilities** S CR

29200 Self Insurance Reserves P CR

**29300 Capital Lease Liability** P CR

**30000 Net Position**

**31000 Unexpended appropriations** P CR

**32000 Transfer in/out of assets S CR**

32200 Transfer - in from others Without Reimburs. P CR

32300 Transfer - out to others Without Reimburs. P DR

**33000 Equity - Cumulative Results of Operations** P CR

**40000 Budgetary**

The agencies should use the same account numbers here as are shown in
the US Government Standard Federal Ledger Chart of Accounts.

**50000** **Revenues**

**52000 Revenue from Services Provided** S CR

52100 Revenue from Government Agencies P CR

52200 Revenue from State Agencies P CR

52300 Revenue from Foreign Governments P CR

52400 Other Revenues P CR

**60000 Expenses**

**61000 Operating/Program Expenses** S DR

61110 Fuel and additives S DR

61112 Fuel and additives-- Bulk (Commercial) P DR

61113 Fuel and additives -- Bulk (Federal) P DR

61114 Fuel and additives -- Retail (Commercial) P DR

61115 Fuel and additives -- Retail (Federal) P DR

61120 Lubricants - Oil S DR

61122 Lubricants - Commercial P DR

61124 Lubricants -- Federal P DR

61130 Variable Lease Costs S DR

61132 Variable Lease Costs (Commercial) P DR

61134 Variable Lease Costs (Federal) P DR

61140 Fixed Lease Costs S DR

61142 Fixed Lease Costs (Commercial) P DR

61144 Fixed Lease Costs (Federal) P DR

61150 Variable Crew Costs S DR

61152 Travel Expenses (Commercial) P DR

61153 Travel Expenses (Federal) P DR

61154 Wages -Hourly, Part-Time or Overtime (Comm) P DR

61155 Wages -Hourly, Part-Time or Overtime (Fed) P DR

61160 Fixed Crew Costs S DR

61162 Wages and Benefits (Commercial) P DR

61163 Wages and Benefits (Federal) P DR

61164 Training Costs (Commercial) P DR

61165 Training Costs (Federal) P DR

61166 Other Costs Associated with Crew (Comm) P DR

61167 Other Costs Associated with Crew (Federal) P DR

61170 Flight Support Costs S DR

61172 Flight Support Costs (Commercial) P DR

61174 Flight Support Costs (Federal) P DR

61180 Ground Servicing S DR

61182 Ground Servicing (Commercial) P DR

61184 Ground Servicing (Federal) P DR

61186 Oxygen Servicing (Commercial) P DR

61188 Oxygen Servicing (Federal) P DR

61200 Variable Maintenance Costs S DR

61210 Labor S DR

61212 Wages and Benefits

\- Scheduled Maintenance (Commercial) P DR

61213 Wages and Benefits

\- Scheduled Maintenance (Federal) P DR

61214 Wages and Benefits

\- Unscheduled Maintenance (Comm.) P DR

61215 Wages and Benefits

\- Unscheduled Maintenance (Federal) P DR

61216 Training (Commercial) P DR

61217 Training (Federal) P DR

61218 Other cost associated with labor (Comm.) P DR

61219 Other cost associated with labor (Federal) P DR

61220 Parts - Airframe S DR

61221 Scheduled (Commercial) P DR

61223 Scheduled (Federal) P DR

61225 Unscheduled (Commercial) P DR

61227 Unscheduled (Federal) P DR

61230 Parts - Avionics S DR

61231 Scheduled (Commercial) P DR

61233 Scheduled (Federal) P DR

61235 Unscheduled (Commercial) P DR

61237 Unscheduled (Federal) P DR

61240 Parts - Engine S DR

61241 Scheduled (Commercial) P DR

61243 Scheduled (Federal) P DR

61245 Unscheduled (Commercial) P DR

61247 Unscheduled (Federal) P DR

61250 Contracts S DR

61252 Contracts (Commercial) P DR

61254 Contracts (Federal) P DR

61260 Engine Overhaul Expense S DR

61262 Engine Overhaul Expense (Commercial) P DR

61264 Engine Overhaul Expense (Federal) P DR

61270 Aircraft Refurbishment Expense S DR

61272 Aircraft Refurbishment Expense (Commercial) P DR

61274 Aircraft Refurbishment Expense (Federal) P DR

61280 Major Component Rebuild

and Overhaul Expense S DR

61282 Major Component Rebuild

and Overhaul Expense (Commercial) P DR

61284 Major Component Rebuild

and Overhaul Expense (Federal) P DR

61290 Life Limited Item Expense S DR

61292 Life Limited Item Expense (Commercial) P DR

61294 Life Limited Item Expense (Federal) P DR

61300 Fixed Maintenance Costs S DR

61310 Maintenance Labor S DR

61312 Maint. Wages and Benefits (Commercial) P DR

61313 Maint. Wages and Benefits (Federal) P DR

61314 Training (Commercial) P DR

61315 Training (Federal) P DR

61316 Other cost associated with labor (Comm.) P DR

61317 Other cost associated with labor (Federal) P DR

61320 Parts - Airframe S DR

61321 Scheduled (Commercial) P DR

61323 Scheduled (Federal) P DR

61330 Parts - Avionics S DR

61331 Scheduled (Commercial) P DR

61333 Scheduled (Federal) P DR

61340 Parts - Engine S DR

61341 Scheduled (Commercial) P DR

61343 Scheduled (Federal) P DR

61350 Contracts S DR

61351 Contracts (Commercial) P DR

61353 Contracts (Federal) P DR

61400 Depreciation Expense S DR

61410 Aircraft P DR

61420 Buildings P DR

61430 Other Structures and Facilities P DR

61440 Equipment P DR

61460 Assets Under Capital Lease P DR

61500 Operations Overhead S DR

61510 Personnel Costs

\- Admin and Management P DR

61520 Building and Ground Maintenance P DR

61530 Janitorial Services P DR

61540 Hangar Fees P DR

61550 Tie Down Fees at Base P DR

61560 Shop Equipment P DR

61570 Shop Parts P DR

61580 Aircraft Components P DR

61600 Other Direct Costs S DR

61610 Other Direct Costs (Commercial) P DR

61620 Other Direct Costs (Federal) P DR

63000 Interest Expense S DR

**63100 Interest Expenses on Borrowing**

**from Treasury** P DR

**63200 Interest Expense on Borrowing**

**from Commercial Sources P DR**

**66000 Administrative Overhead** S DR

66010 Indirect Administrative Costs P DR

68000 Other Expenses P DR

69000 WCF/Reserve Expenses S DR

69010 Self-Insurance S DR

69011 Hull Insurance P DR

69012 Liability Insurance P DR

69500 Reserve Contribution S DR

69510 Variable Expense Reserve S DR

69512 Engine Overhaul Reserve P DR

69514 Major Component Rebuild and Ohaul Res. P DR

69516 Life Limited Item Reserve P DR

69520 Fixed Expense Reserves S DR

69522 Aircraft Refurbishment Reserves P DR

69526 Life Limited Item Reserve P DR

**70000 Gains/Losses/Extraordinary Items** S DC

**71000 Gains** S CR

**71100 Gains on Disposition of Assets** P CR

**71900 Other Gains** P CR

**72000 Losses** S DR

**72100 Loss on Disposition of Assets** P DR

72300 Litigation Settlement Costs P DR

72500 Accident Repair Cost P DR

**72900 Other Losses** P DR

74000 Prior Period Adjustments P DC

**90000 Aircraft Statistical Use**

91000 Fixed Wing Flying Hours (FW) S

91100 FW Single Engine (SE) S

91110 FW SE Reciprocating P

91120 FW SE Turbine P

91130 FW SE Jet P

91200 FW Multi-Engine (ME) S

91210 FW ME Reciprocating P

91220 FW ME Turbine P

91230 FW ME Jet P

92000 Helicopter Flying Hours (HE) S

92100 HE Single Engine (SE) S

92110 HE SE Reciprocating P

92120 HE SE Turbine P

92200 HE Multi Engine (ME) S

92210 HE ME Reciprocating P

92220 HE ME Turbine P

93000 Fixed Wing Block-to-block Hours (FW) S

93100 FW Single Engine (SE) S

93110 FW SE Reciprocating P

93120 FW SE Turbine P

93130 FW SE Jet P

93200 FW Multi-Engine (ME) S

93210 FW ME Reciprocating P

93220 FW ME Turbine P

93230 FW ME Jet P

94000 Helicopter Block-to-block Hours (HE) S

94100 HE Single Engine (SE) S

94110 HE SE Reciprocating P

94120 HE SE Turbine P

94200 HE Multi Engine (ME) S

94210 HE ME Reciprocating P

94220 HE ME Turbine P

**3.3 Expanding and Changing the Chart of Accounts**

As mentioned earlier, flexibility is a major attribute of any
well-designed accounting system. It allows for the uncertainties of the
future. A well-designed chart of accounts must be able to change as the
structure and objectives of the organization change. The following
highlights areas Government agencies should consider when designing
their own chart of accounts.

3.3.1 Expansion of the Account Numbering System

First, a Government agency might want to consider the number of digits
used to identify the accounts. The SGL and many commercial charts of
accounts use four digits; however, this may not be enough. The size of
the organization, the amount of activity, and the level of detail
required are factors to consider when determining the length of the
account numbers. The chart of accounts illustrated in this guide uses
five-digit account numbers because of the large number of sub accounts
required in the expense section.

3.3.2 Spacing of Accounts

An organization should also consider the amount of numeric spaces left
between account numbers when developing the chart of accounts. If no
numeric spaces are left between sub accounts, adding a new sub account
becomes a major problem since the entire chart of accounts will need to
be redone. Therefore, most charts of accounts, including the one
illustrated in this guide, insert numeric spaces between the sub
accounts to allow for easy expansion and changes.

**3.4 Maximizing Accounting Flexibility by Expanding the Chart of
Accounts**

In order to receive the maximum benefit from an accounting system, the
information must be able to be consolidated and presented in formats
that are useful to multiple management levels within the organization.
The aviation operations manager will need and want to know the detailed
costs for operating each aircraft in order to make sound fleet
management decisions. On the other hand, the organization\'s
administrative managers may only need summary information to support
their management activities.

These various information needs must be accommodated by the chart of
accounts. The chart of accounts must be structured so that it collects
the financial data in account breakouts that meet the most detailed
information requirements. It must also provide a mechanism that allows
these detailed account breakouts to be rolled up into the summary
information accounts required by administrative users of the accounting
data. Expanding the chart of accounts by adding suffixes attached to the
root account number will provide the required mechanism.

The following example illustrates how agencies can build account numbers
supporting data collection for a range of management requirements.

61XXX.117FR.9999.211

\_\_\_\_\_\_\_\_\_\_\_\| \_\_\_\| \| \|\_\_\_\_

\| \| \| \|

\| \| \| Object Class Code

Root Account Number \| Work Order\\Contract Code

\|

Aircraft Registration Number

3.4.1 Accounting for Costs by Aircraft

Accounting systems are designed to provide financial information about
an organization. Without additional manipulation, they do not provide
information about a particular aircraft. Therefore, except where a one
aircraft operation exists, a system of costing must be used that allows
the accumulation of cost data for an individual aircraft as well as
adding the costs for each individual aircraft into a total cost for the
organization. This method of accounting is called \"job costing\" or
\"cost accounting." In this guide, the task is accomplished by adding
additional digits to the account number.

For example, assume that an organization owns and operates three
aircraft and needs to track all operating costs to a specific airframe.
The root account number for fuel is 61110. Expanding the account number
by adding a code that links the cost to a specific airframe is easy.
Simply use the aircraft\'s registration numbers to expand the chart of
account. Account 61110 becomes a summary account for three sub accounts
(61110.105NA, 61110.108NA, and 61110.540FS). This allows the aviation
manager to sort fuel cost data by specific airframe, and it also allows
the aircraft specific costs to be summarized into one root account that
can be reported to administrative management within the organization.

3.4.2 Accounting For Costs by Object Class Codes

Although the Federal Government is moving toward a general ledger system
of accounting, the object class code system of appropriating and
obligating funds is still in use. Agencies should consider expanding
their chart of accounts to include object class code information. This
will eliminate the need to operate dual accounting systems or to perform
data conversions before reporting budgetary information to required
users. For example, the root account number for variable cost avionics
parts is 61230 in the chart of accounts illustrated in this guide. The
object class code 26.0 is designated for supplies and materials.
Attaching the appropriate object class codes as suffixes to the account
numbers results in account numbers (i.e., 61230.XXXXX.9999.260) that
allow the accounting data to be easily sorted and reported by object
class code.

Refer to the Office of Management and Budget\'s Circular A-11 which
details the

\(i\) purpose and (ii) reporting requirements and format for the object
class codes. Your agencies' finance personnel are familiar with this
process. The table on page 24-B gives a generic cross-reference for
object class codes and cost elements.

3.4.3 Accounting for Costs by Work Order Number

Some agencies may find it beneficial to sort on all costs associated
with a certain project. Again, this can be accomplished by adding a
suffix to the end of the root account number. Imagine that an aircraft
is undergoing an engine overhaul that has been assigned work order
number 0123. At a minimum, an engine overhaul performed by in-house
mechanics will require labor costs and parts costs. Assigning a unique
work order number to the engine overhaul project will allow all of these
costs to be consolidated into the total cost for completing the engine
overhaul.

If agencies need to separate labor and parts expenditures, they will
want to develop separate accounts (i.e., for organizations that do not
have overhaul reserves in a working capital fund, change the illustrated
chart of accounts to make 61261 engine overhaul expense parts -
commercial and 61262 engine overhaul expense labor - commercial). The
expanded account numbers would then be 61261.XXXXX.0123 and
61262.XXXXX.0123. The 0123 work order number will link the costs
contained in separate accounts to a specific project. With a working
capital fund, the engine overhaul would be charged to 21500.XXXXX.0123,
or if you desire to have parts separate from labor 21501.XXXXX.0123 and
21502.XXXXX.0123.

3.4.4 Other Possibilities

Obviously, agencies can add any suffix to the root account numbers that
will make the accounting data more useful for their purposes. Some other
possibilities may include: mission activity, site location, and contract
code. Agencies interested in tracking the accounting data in several
ways will want to attach more than one suffix to the root account
numbers. In deciding which options to include, remember to start by
considering what output the system will have to produce and work
backwards from there. Make sure to build flexibility into the system
otherwise updating the chart of accounts will become a very difficult
process.

5.  **Sample Chart of Account Definitions (Based on Federal Government
    Cost**

**Elements)**

This section shows supporting definitions for the sample chart of
accounts outlined in the previous section. Government agencies can use
these definitions to obtain more information on selected accounts. The
explanation for each selected account contains a description of the
account, the source document(s) that flow into the account, where the
account information flows with respect to OMB cost comparisons, such as
A-76, A-126 and FAIRS, and additional comments about the account and
related sub accounts.

Reserve accounts are also described in the following pages. These can be
used in Working Capital Fund (WCF) programs. These accounts cannot be
incorporated into the accounting system for appropriated programs;
however, managers should still calculate these reserve expenses in order
to realize the true cost of operating the aviation program. These
calculated reserve expenditures must also be incorporated into cost
comparison studies and life cycle cost analyses. Examples of these
reserve accounts include: reserve for engine overhaul, reserve for
aircraft refurbishment, reserve for component rebuild and overhaul, and
reserve for retirement items. Other expenses that may not be actual cash
outlays (and therefore not tracked in all agencies\' accounting systems)
but that need to be included in cost comparisons are interest expense,
depreciation and self-insurance expense.

Of particular interest is the source of labor, parts, supplies,
materials and services that support aircraft operations or aviation
programs. FAIRS requires that agencies report whether their aviation
funds are spent with a commercial source or a federal source (which can
be internally within the reporting agency or with another federal
agency). Cost account records must be established for tracking the
expenditures in these categories. For example, in account 61160 'Fixed
Crew Costs' requires separate accounting for salaries paid to Federal
Employees (Federal source) or to contract employees (commercial source).
If both types of costs exist, the agency may track them discretely by
establishing additional accounts for each type of expense (61162 'Wages
and Benefits -- Commercial', and 61163 'Wages and Benefits -- Federal').

6.  **Cost Accounting Guide Correlation Matrix**

The table on page 24-A shows how the cost accounting system and Chart of
Accounts discussed in this guide support the various cost elements that
are required to be collected for the FAIRS system input, as well as for
A-76 and A-126 analyses.

![](media/image2.png){width="10.057638888888889in"
height="7.445833333333334in"}

![](media/image3.png){width="10.133333333333333in"
height="6.933333333333334in"}

![](media/image4.png){width="10.13888888888889in"
height="6.488888888888889in"}

**ITEM: Fund Balance with Treasury ACCOUNT: 10100**

**FINANCIAL STATEMENT**: Balance Sheet - Asset

**DEFINITION:**

All funds on deposit with Treasury. This account is maintained by fund
to show the amount of monies received, net disbursements, cash advances
received from other agencies, and net reimbursements collected and
deposited to the Treasury.

**SOURCE:** All collection documents and all disbursement documents.

**COMMENTS:**

All cash received is immediately deposited into the Treasury and
therefore becomes *funds*. Likewise all payments made by a federal
finance system are disbursements from the Treasury, and from the
appropriate fund.

Receipts are usually:

> **Debit** to this account
>
> **Credit** to Accounts Receivable 13100

Disbursements are usually:

> **Debit** to the Accounts Payable 21100
>
> **Credit** to this account

**A-126:** Not Applicable

**A-76:** Not Applicable

**FAIRS:** Not Applicable

**OBJECT CLASS:** Not applicable to asset accounts.

**ITEM: Accounts Receivable ACCOUNT: 13100**

**FINANCIAL STATEMENT**: Balance Sheet - Asset

**DEFINITION:**

Amounts due from others when the right to receive funds accrues, which
may result from the performance of services or the delivery of goods.
This account is maintained to show the amount billed and still
receivable from the public or other government agencies for materials or
services that are reimbursable to this fund. The accounts receivable
file supports this account.

> **SOURCE:** Bills issued to customers for services provided or goods
> furnished. Also bad debt write-off or disputed balance adjustments may
> result in credits to Accounts Receivable.
>
> Collections received reduce this account balance.

**COMMENTS:**

Record of services provided or goods furnished must cause a revenue to
an account in the 50000 series and an offsetting receivable to this
account. When a customer pays the resulting bill, a reduction to this
account occurs. A supporting accounts receivable file must be maintained
for each and every customer; this supporting file is called a subsidiary
file.

Increases to this account are:

> **Debit** to this account for the value of service provided
>
> **Credit** to a revenue account in the 50000 series for an amount
> equal to the bill that was sent to the customer

Decreases to this account are:

> **Debit** to Fund Balance with Treasury (Cash) account 10100
>
> **Credit** to this account for the amount of the collection from a
> customer

**A-126:** Not Applicable

**A-76:** Not Applicable

**FAIRS:** Not Applicable

**OBJECT CLASS:** Not applicable to asset accounts

**ITEM: Inventories ACCOUNT: 15000**

**Summary Account**

**FINANCIAL STATEMENT**: Balance Sheet - Asset

**DEFINITION:**

The cost/value of tangible personal property held as inventory for sale
or transfer as operating materials and supplies consumed in normal
operations.

**SOURCE:** This is a summary account -- the posting accounts are 15110
and 15120

**COMMENTS:**

> This account is used when an organization has an inventory of spare
> parts or fuel or other items held in storage for later use in normal
> operations. No transactions are posted to this account.

**A-126:** Not Applicable

**A-76:** Not Applicable

**FAIRS:** Not Applicable

**OBJECT CLASS:** Not Applicable

**ITEM: Inventories -- Inventory for Agency Operations ACCOUNT: 15100**

**Summary Account**

**FINANCIAL STATEMENT**: Balance Sheet - Asset

**DEFINITION:**

The cost/value of tangible personal property held as inventory for sale
or transfer as operating materials and supplies consumed in normal
operations.

**SOURCE:** This is a summary account -- the posting accounts are 15110
and 15120

**COMMENTS:**

> This account is used when an organization has an inventory of spare
> parts or fuel or other items held in storage for later use in normal
> operations. No transactions are posted to this account.

**A-126:** Not Applicable

**A-76:** Not Applicable

**FAIRS:** Not Applicable

**OBJECT CLASS:** Not Applicable

**ITEM: Inventories \-- Fuel ACCOUNT: 15110**

**FINANCIAL STATEMENT**: Balance Sheet - Asset

**DEFINITION:**

The cost/value of tangible personal property (aviation fuel) held as
inventory for sale or transfer as operating materials and supplies
consumed in normal operations.

**SOURCE:** Bulk fuel purchase receipts track fuel brought in and fuel
issue tickets track fuel taken out.

**COMMENTS:**

This account is used when an organization has a fuel stores site with
the capacity to take on large quantities of fuel for later issue to a
specific aircraft. It is very important that the units (gallons) of fuel
be tracked as well as the value.

Fuel receipts cause:

> **Debit** to this account
>
> **Credit** to Accounts Payable account 21100

Fuel issues cause:

> **Debit** to the appropriate expense account (probably Fuel 61113)
>
> **Credit** to this account

**A-126:** Not Applicable

**A-76:** Not Applicable

**FAIRS:** Not Applicable

**OBJECT CLASS:** 26.XX

**ITEM: Inventories - Parts ACCOUNT: 15120**

**FINANCIAL STATEMENT**: Balance Sheet - Asset

**DEFINITION:**

The cost/value of tangible personal property (aircraft parts) held in
reserve as inventory for future sale, because it is not readily
available in the immediate area or because there is more than a remote
chance that it will eventually be needed.

**SOURCE:** Purchase orders for aircraft parts that are going to become
a stores item to be issued at a later time to a specific aircraft.

**COMMENTS:**

This account is used when an organization has the ability to staff and
operate an aircraft parts room and has determined that the local sources
for aircraft parts are less than adequate to service their needs. A
secure parts room with a serviceable parts inventory system is very
important to the operation of an inventory of aircraft parts.

Receipt of parts:

> **Debit** this account
>
> **Credit** Accounts Payable 21100

Issue of a part from inventory:

> **Debit** the appropriate expense account (such as; 61223,
> 61227,61233, 61237, 61243 or 61247 and 61323, 61333 or 61343)
>
> **Credit** this account

**A-126:** Not Applicable

**A-76:** Not Applicable

**FAIRS:** Not Applicable

**OBJECT CLASS:** 26.XX

**ITEM: Fixed Assets (Property, Plant and Equipment) ACCOUNT: 17000**

**Summary Account**

**FINANCIAL STATEMENT**: Balance Sheet - Asset

**DEFINITION:**

The cost of government-owned property, plant and equipment (such as
aircraft, tugs, trucks, hangars, other buildings, etc.) under the
control of this aviation organization. This account includes aircraft
and building improvements and renovations, as well as aircraft and
buildings acquired under lease-purchase agreements. Also included is any
accumulated depreciation on these assets.

**SOURCE:** This is a summary account. Posting accounts are 17300
through 17590

**COMMENTS:**

> The assets included here are all aircraft, equipment and buildings
> used to produce the aviation services for the agency. It is important
> to include only the assets that are actually owned by the agency.
> Aircraft, buildings and equipment that are leased using operating
> leases or short term leases should not be included here. On the other
> hand, assets that are acquired through lease-to-purchase or capital
> leases must be included in account 18110 -- 18190.

**A-126:** Not Applicable

**A-76:** Not Applicable

**FAIRS:** Not Applicable

**OBJECT CLASS:** Not Applicable

**ITEM: Buildings, Improvements and Renovation ACCOUNT: 17300**

**FINANCIAL STATEMENT**: Balance Sheet - Asset

**DEFINITION:**

The cost of government-owned buildings under the control of this
aviation organization. This account includes building improvements and
renovations.

**SOURCE:** Purchase order or contracts for the capital construction of
the building, or a property transfer document that transfers the
building to the aviation activity.

**COMMENTS:**

Be sure to capitalize only buildings and improvements that are the
responsibility of the aviation activity. In doing so ensure that the
building or improvement was paid for with aviation funds or transferred
from another agency. Also, verify that the buildings transferred-in are
removed from the losing agency books concurrent with the capitalization
on the aviation activities\' books.

Paying for a building:

> **Debit** this account
>
> **Credit** Accounts Payable 21100

Receiving a transferred building:

> **Debit** this account
>
> **Credit** Transfers-in from Others without Reimbursement 32200

**A-126:** Not Applicable

**A-76:** Not Applicable

**FAIRS:** Not Applicable

**OBJECT CLASS:** 32.XX

**ITEM: Accumulated Depreciation ACCOUNT: 17390**

**FINANCIAL STATEMENT**: Balance Sheet - Asset

**DEFINITION:**

Accumulates depreciation charged to expense for buildings.

**SOURCE:** Periodic expense reporting document that records the
depreciation.

**COMMENTS:**

This account accumulates the aggregate of all periods depreciation
expenses over the life of the building(s). This account carries a credit
balance to offset a portion of the debit balance of the building
account, thereby reducing the net value of the assets as the building(s)
age and are used up (deteriorate) over their productive life.

Booking of depreciation expense:

> **Debit** the expense account 61420 (Depreciation Expense - Buildings)
>
> **Credit** this account

**OBJECT CLASS:**

This side of the above entry does not need an object class; however,
many finance systems will require an object class on the expense side of
this document. If this is the case, be sure to use the same object class
on both sides of the entry so they offset each other and therefore have
no effect on the budgetary reports, such as the SF-225. Suggest that
either object class 25.XX or 26.XX be used.

**ITEM: Other Structures and Facilities ACCOUNT: 17400**

**FINANCIAL STATEMENT**: Balance Sheet - Asset

**DEFINITION:**

The cost or appraised value of government-owned structures and
facilities (other than buildings) that are purchased by the aviation
activity and/or are under the control of the aviation activity**.**

**SOURCE:** Purchase order or contracts for the capital construction of
the structure or facility, or a property transfer document that
transfers it to the aviation activity.

**COMMENTS:**

See the Comments on the page for account 17300. The same processes apply
to this account.

**A-126:** Not Applicable

**A-76:** Not Applicable

**FAIRS:** Not Applicable

**OBJECT CLASS:** 32.XX

**ITEM: Accumulated Depreciation ACCOUNT: 17490**

**FINANCIAL STATEMENT**: Balance Sheet - Asset

**DEFINITION:**

Accumulates depreciation charged to expense for structures and
facilities.

**SOURCE:** Periodic expense reporting document that records the
depreciation.

**COMMENTS:**

This account accumulates the aggregate of all periods depreciation
expenses over the life of the structures and facilities. This account
carries a credit balance to offset a portion of the debit balance of the
structures and facilities account, thereby reducing the net value of the
assets as they age and are used up (deteriorate) over their productive
life.

Booking of depreciation expense:

> **Debit** the expense account 61430 (Depreciation Expense - Other
> Structures and Facilities)
>
> **Credit** this account

**A-126:** Not Applicable

**A-76:** Not Applicable

**FAIRS:** Not Applicable

**OBJECT CLASS:** This side of the above entry does not need an object
class; however, many finance systems will require an object class on the
expense side of this document. If this is the case, be sure to use the
same object class on both sides of the entry so they offset each other
and therefore have no effect on the budgetary reports, such as the
SF-225. Suggest that either object class 25.XX or 26.XX be used.

**ITEM: Equipment ACCOUNT: 17500**

**Summary Account**

**FINANCIAL STATEMENT**: Balance Sheet - Asset

**DEFINITION:**

This account is maintained to show the cost of aircraft, aircraft
modifications, mission equipment and other equipment used to support the
aviation operation. The amounts shown are either the purchase price
and/or the estimated market value of aircraft and equipment at the time
they are transferred without cost.

**SOURCE:** This is a summary account. Posting is done to accounts
17510 - 17590

**COMMENTS:**

It is critical that an aviation activity has detailed capitalization
records on each aircraft, aircraft modification and price of major
equipment used. Therefore ensure that the subsidiary records are
complete and accurate. Also, verify that aircraft or equipment
transferred-in are removed from the losing agency's books concurrent
with the capitalization on the aviation activities\' books.

**A-126:** Not Applicable

**A-76:** Not Applicable

**FAIRS:** Not Applicable

**OBJECT CLASS:** Not Applicable

**ITEM: Equipment - Aircraft ACCOUNT: 17510**

**FINANCIAL STATEMENT**: Balance Sheet - Asset

**DEFINITION:**

This account is maintained to show the cost of aircraft purchased and/or
the estimated market value of aircraft at the time they are transferred
without cost. This account is supported by subsidiary records showing
the description, location, cost or appraised value, and other essential
acquisition data on each individual aircraft.

**SOURCE:** Purchase order or contracts for the purchase of the
aircraft, or a property transfer document that transfers the aircraft to
the aviation activity.

**COMMENTS:**

It is critical that an aviation activity has detailed capitalization
records on each aircraft, therefore ensure that the subsidiary records
are complete and accurate. Also, verify that the aircraft transferred-in
are removed from the losing agency's books concurrent with the
capitalization on the aviation activities\' books.

Paying for an aircraft:

> **Debit** this account
>
> **Credit** Accounts Payable 21100

Receiving a transferred aircraft:

> **Debit** this account
>
> **Credit** Transfers-in from Others without Reimbursement 32200

**A-126:** Aircraft Cost

**A-76:** Not Applicable

**FAIRS:** 6

**OBJECT CLASS:** 31.XX

**ITEM: Equipment -- Aircraft Modifications ACCOUNT: 17520**

**FINANCIAL STATEMENT**: Balance Sheet - Asset

**DEFINITION:**

This account is maintained to show the cost of major modifications
accomplished on aircraft when purchased or at a later date when its
mission changes. This account is supported by subsidiary records showing
the description, location, cost or appraised value, and other essential
acquisition data on the modifications performed for each individual
aircraft.

**SOURCE:** Purchase order or contracts for the modification of the
aircraft

**COMMENTS:**

It is critical that an aviation activity has detailed capitalization
records on each aircraft, therefore ensure that the subsidiary records
are complete and accurate.

Paying for an aircraft modification:

> **Debit** this account
>
> **Credit** Accounts Payable 21100

**A-126:** Aircraft Cost

**A-76:** 19d, 19e

**FAIRS:** 62

**OBJECT CLASS: 31.XX**

**ITEM: Equipment - Other Than Aircraft ACCOUNT: 17530**

**FINANCIAL STATEMENT**: Balance Sheet - Asset

**DEFINITION:**

Tangible items of a durable nature used in the operations of an aircraft
activity including but not limited to items such as word processors,
typewriters, personal computers, calculators, furniture, copiers,
machinery, automotive equipment, and ADP equipment (excluding ADP
software). This account is supported by subsidiary records showing the
descriptions, location, cost or appraised value, and other essential
capitalization data.

**SOURCE:** Purchase order or contracts for the purchase of equipment,
or a property transfer document that transfers the equipment to the
aviation activity.

**COMMENTS:**

It is critical that an aviation activity has detailed capitalization
records on all equipment. Therefore ensure that the subsidiary records
are complete and accurate. Also, verify that equipment transferred in is
removed from the losing agency's books concurrent with the
capitalization on the aviation activities\' books. Note that your agency
may have capitalization levels below which acquisitions are not
capitalized.

Paying for equipment:

> **Debit** this account
>
> **Credit** Accounts Payable 21100

Receiving a transferred equipment:

> **Debit** this account
>
> **Credit** Transfers-in from Others without Reimbursement 32200

**A-126:** Not Applicable

**A-76:** Not Applicable

**FAIRS:** Not Applicable

**OBJECT CLASS:** 31.XX

**ITEM: Accumulated Depreciation ACCOUNT: 17590**

**FINANCIAL STATEMENT**: Balance Sheet - Asset

**DEFINITION:**

Accumulates depreciation charged to expense for equipment. Depreciation
on aircraft must be kept separate from all other equipment depreciation
through the use of a subsidiary file on aircraft.

**SOURCE:** Periodic expense reporting document that records the
depreciation.

**COMMENTS:**

The accumulated depreciation on aircraft should be maintained on a
subsidiary record for each aircraft. This account carries a credit
balance to offset a portion of the debit balance of the equipment
account, thereby reducing the net value of the assets as they age and
are used up (deteriorate) over their productive life.

Booking of depreciation expense on aircraft:

> **Debit** the expense account 61410 (Depreciation Expense - Aircraft)
>
> **Credit** this account

Booking of depreciation expense on equipment, other than aircraft:

> **Debit** the expense account 61440 (Depreciation Expense - Equipment)
>
> **Credit** this account

**A-126:** Not Applicable

**A-76:** Not Applicable

**FAIRS:** Not Applicable

**OBJECT CLASS:**

This side of the above entry does not need an object class; however,
many finance systems will require an object class on the expense side of
this document. If this is the case, be sure to use the same object class
on both sides of the entry so they offset each other and therefore have
no effect on the budgetary reports, such as the SF-225. Suggest that
either object class 25.XX or 26.XX be used.

**ITEM: Assets under Capital Lease ACCOUNT: 18100**

**Summary Account**

**FINANCIAL STATEMENT**: Balance Sheet - Asset

**DEFINITION:**

This account is maintained to show the value of aircraft, aircraft
modifications, mission equipment and other equipment used for the
aviation operation and acquired through a capital lease or
lease-to-purchase agreement.

**SOURCE:** This is a summary account. Posting is done to accounts
18110 - 18190

**COMMENTS:**

It is critical that an aviation activity has detailed capitalization
records on each aircraft, major equipment item used. Therefore ensure
that the subsidiary records are complete and accurate.

**A-126:** Not Applicable

**A-76:** Not Applicable

**FAIRS:** Not Applicable

**OBJECT CLASS:** Not Applicable

**ITEM: Assets Under Capital Lease - Aircraft ACCOUNT: 18110**

**FINANCIAL STATEMENT**: Balance Sheet - Asset

**DEFINITION:**

The value of aircraft being leased under terms which are essentially
equivalent to an installment purchase.

**SOURCE:** The total cost of the capitalized portion of an aircraft
lease contract.

**COMMENTS:**

The amount to be capitalized should include the total cost of the lease
(excluding interest and taxes) except for any use payment amount that is
based on a flying hour consumption of the aircraft. Most lease contracts
will have the asset value included in the payments that are based on the
passage of time (days, months, or other calendar periods), while the
usage cost if any will have the payment amount based on the number of
hours of flight time.

The posting of this account is as follows:

> **Debit** this account for the total capital amount of the lease
>
> **Credit** Capital Lease Liability (account 29300)

**A-126:** Not Applicable

**A-76:** Not Applicable

**FAIRS:** Not Applicable

**OBJECT CLASS:** 31.XX

**ITEM: Assets Under Capital Lease - Other Assets ACCOUNT: 18120**

**FINANCIAL STATEMENT**: Balance Sheet - Asset

**DEFINITION:**

The value of assets being leased under terms which are essentially
equivalent to an installment purchase.

**SOURCE:** The contractual document that establishes the lease (total
cost of the capitalized portion of the lease contract).

**COMMENTS:**

This account provides for the capitalization of major assets that are
purchased through a long-term lease purchase contract (excluding
interest and taxes).

The posting of this account is as follows:

> **Debit** this account for the total capital amount of the lease
>
> **Credit** Capital Lease Liability (account 29300)

**A-126:** Not Applicable

**A-76:** Not Applicable

**FAIRS:** Not Applicable

**OBJECT CLASS:** 31.XX

**ITEM: Accumulated Depreciation ACCOUNT: 18190**

**FINANCIAL STATEMENT**: Balance Sheet - Asset

**DEFINITION:**

Accumulates depreciation charged to expense for assets under capital
lease. Keep a separate subsidiary file for aircraft.

**SOURCE:** Periodic expense reporting document that records the
depreciation.

**COMMENTS:**

This account carries a credit balance to offset a portion of asset
accounts 18110 and 18120, thereby keeping the asset portion of the
Balance Sheet adjusted for the amount of the asset that has been
consumed in the production of the services of the aviation activity.

> **Debit** expense account 61460 (Depreciation Expense - Assets Under
> Capital Lease)
>
> **Credit** this account

**A-126:** Not Applicable

**A-76:** Not Applicable

**FAIRS:** Not Applicable

**OBJECT CLASS:**

This side of the above entry does not need an object class; however,
many finance systems will require an object class on the expense side of
this document. If this is the case, be sure to use the same object class
on both sides of the entry so they offset each other and therefore have
no effect on the budgetary reports, such as the SF-225. Suggest that
either object class 25.XX or 26.XX be used.

**ITEM: Accrued Liabilities - Other ACCOUNT: 21000**

**Summary Account**

**FINANCIAL STATEMENT**: Balance Sheet - Liability

**DEFINITION:**

This account is composed of two major elements. The first is the amounts
owed to commercial or other federal entity for goods, services and other
property ordered and received. The other is the accounts used to
establish reserve accounts for the overhaul of the engine(s) or major
components, replacement of time limited parts and refurbishment of the
aircraft interior or exterior.

**SOURCE:** This is a summary account. Posting accounts are 21100 -
21515

**COMMENTS:**

> Entries to this credit balance account usually come about by the
> receipt of a good or service that was previously ordered. For the
> reserve account, the entries occur as funds are set aside as a result
> of flight activity.

**A-126:** Not Applicable

**A-76:** Not Applicable

**FAIRS:** Not Applicable

**OBJECT CLASS:** Not Applicable

**ITEM: Accounts Payable ACCOUNT: 21100**

**FINANCIAL STATEMENT**: Balance Sheet - Liability

**DEFINITION:**

Amounts owed to another federal or non-federal entity for goods and
other property ordered and received, and for services rendered by other
than employees.

**SOURCE:** All purchase orders and contracts, when the item or service
is received.

**COMMENTS:**

Entries to this credit balance account usually come about by the receipt
of a good or service that was previously ordered. The cost side of the
entry can be either an expense or an asset purchase.

**Debit** to any number of expense accounts or a capital asset account

> **Credit** to this account

To liquidate this account (pay for the item):

> **Debit** this account
>
> **Credit** account 10100 (Fund Balance with Treasury)

**A-126:** Not Applicable

**A-76:** Not Applicable

**FAIRS:** Not Applicable

**OBJECT CLASS:** Not applicable to this account.

**ITEM: Interest Payable ACCOUNT: 21140**

**FINANCIAL STATEMENT**: Balance Sheet - Liability

**DEFINITION:**

Interest owed on money borrowed for the acquisition of an asset through
a lease-to-purchase, capital lease or other financed purchase.

**SOURCE: Shown on the periodic loan payment statement from the lender.
Also can be calculated using the** Lease-to-purchase or capital lease
contract. This document will contain a table or other means that allows
calculation of interest due.

**COMMENTS:**

> Entries to this credit balance account occur at the beginning of the
> loan period for the entire interest amount due during the term of the
> lease purchase or capital lease. This amount is reduced each month or
> quarter as each monthly or quarterly payment is made.

To liquidate this account (pay for the item):

> **Debit** this account
>
> **Credit** account 10100 (Fund Balance with Treasury)

**A-126:** Not Applicable

**A-76:** Not Applicable

**FAIRS:** Not Applicable

**OBJECT CLASS:** Not Applicable

**ITEM: Reserves ACCOUNT: 21500**

**Summary Account**

[**FINANCIAL STATEMENT:** Balance Sheet - Liability]{.underline}

**DEFINITION:**

A reserve account that accumulates the periodic expense associated with
the overhaul or replacement of major aircraft components (such as
engines, transmissions, landing gear, etc.), as well as the periodic
expense associated with the periodic refurbishment and repainting of the
aircraft. When actual component overhaul, replacement or refurbishment
occurs this account is reduced by the amount of actual expense.

[**SOURCE:** This is a summary account. Postings are done to accounts
21510 - 21540]{.underline}

**COMMENTS:**

This account can be successfully implemented only when agencies
establish working capital funds. The amount in this account will
increase or decrease as reserves are accumulated or overhauls are paid
for.

It is important that agencies operating aircraft through year specific
appropriations understand the concept of reserves even though they will
not have reserve accounts set up in their official accounting system.
They will need to calculate what the reserves would be for each
accounting period and report these expenditures in the cost comparisons
and cost reporting required by OMB and GSA.

**A-126:** Not Applicable

**A-76:** Not Applicable

**FAIRS:** Not Applicable

[**OBJECT CLASS:** Not Applicable]{.underline}

**ITEM: Reserve - Engine Overhaul ACCOUNT: 21510**

[**FINANCIAL STATEMENT:** Balance Sheet - Liability]{.underline}

**DEFINITION:**

A reserve account that accumulates the periodic expense amount from
account 69512, engine overhaul, until the actual overhaul occurs. When
actual engine overhaul occurs this account is reduced by the amount of
actual expense. Only an engine overhaul or rebuild that renews the time-
between overhaul life of the engine is to be charged to this reserve
account. The overhaul can be caused by a premature failure of the engine
or by reaching the established time between overhaul life.

[**SOURCE:** Vendor invoices, Time sheets, Historical data]{.underline}

**COMMENTS:**

This account can be successfully implemented only when agencies
establish working capital funds. The amount in this account will
increase or decrease as reserves are accumulated or overhauls are paid
for.

The debit and credit entries required to record the transaction for
accumulating funds in the reserve account for engine overhaul follow:

> **Debit** En*gine Overhaul Expense (expense account number 69512).*
>
> **Credit** Reserve Engine Overhaul (liability account number
> 21510),and

At the time of the engine overhaul, the reserve account will have to be
reduced by the cost for completing the overhaul. To record this
transaction:

> **Debit** Reserve Engine Overhaul account (liability account 21510)
>
> **Credit** Accounts Payable account (liability account 21100)

At the time the invoice is paid, the transaction is recorded as follows:

> **Debit** Accounts Payable account (liability account 21100)
>
> **Credit** Cash account (asset account 10100)

It is important that agencies operating aircraft through year specific
appropriations understand the concept of reserves even though they will
not have reserve accounts set up in their official accounting system.
They will need to calculate what the reserves would be for each
accounting period and report these expenditures in the cost comparisons
and cost reporting required by OMB and GSA.

**A-126:** Not Applicable

**A-76:** Not Applicable

**FAIRS:** Not Applicable

[**OBJECT CLASS:** 11.X, 12.X, 21.X, 22.X, 23.X., 25.X, and
26.X.]{.underline}

**ITEM: Reserve - Aircraft Refurbishment ACCOUNT: 21520**

[**FINANCIAL STATEMENT:** Balance Sheet - Liability]{.underline}

**DEFINITION:**

A reserve account that accumulates the periodic expense amount from
account 69522, aircraft refurbishment, until actual refurbishment
occurs. When actual aircraft refurbishment occurs this account is
reduced by the amount of actual expense.

[**SOURCE:** Vendor invoices]{.underline}

**COMMENTS:**

This account can be successfully implemented only when agencies
establish working capital funds. The amount in this account will
increase or decrease as reserves are accumulated or refurbishments are
paid for.

It is important that agencies operating aircraft through year specific
appropriations understand the concept of reserves even though they will
not have reserve accounts set up in their official accounting system.
They will need to calculate what the reserves would be for each
accounting period and report these expenditures in the cost comparisons
and cost reporting required by OMB and GSA.

Recording the transaction is as shown above for \"Reserve-Engine
Overhaul\"

**A-126:** Not Applicable

**A-76:** Not Applicable

**FAIRS:** Not Applicable

[**OBJ CLASS:** 11.X, 12.X, 21.X, 22.X, 23.X, 25.X, and
26.X.]{.underline}

**ITEM: Reserve - Component Rebuild and Overhaul ACCOUNT: 21530**

**FINANCIAL STATEMENT:** Balance Sheet - Liability

**DEFINITION:**

A reserve account that accumulates the periodic expense amount from
account 69514,component rebuild and overhaul, until actual overhauls
occur. When actual component overhauls occur, this account is reduced by
the amount of the actual expense. Only a component overhaul or rebuild
that causes a new useful life in specified hours or future cycles should
be charged to this reserve account.

**SOURCE:** Vendor invoices

**COMMENTS:**

This account can be successfully implemented only when agencies
establish working capital funds. The amount in this account will
increase or decrease as reserves are accumulated or overhauls are paid
for.

It is important that agencies operating aircraft through year specific
appropriations understand the concept of reserves even though they will
not have reserve accounts set up in their official accounting system.
They will need to calculate what the reserves would be for each
accounting period and report these expenditures in the cost comparisons
and cost reporting required by OMB and GSA.

Recording the transaction is as shown above for \"Reserve-Engine
Overhaul\"

**A-126:** Not Applicable

**A-76:** Not Applicable

**FAIRS:** Not Applicable

**OBJECT CLASS:** 11.X, 12.X, 21.X, 22.X, 23.X, 25.X, and 26.X.

**ITEM: Reserve -- Life Limited Item ACCOUNT: 21540**

**FINANCIAL STATEMENT:** Balance Sheet - Liability

**DEFINITION:**

A reserve account that accumulates the periodic expense amount from
account 69516 and 69526, retirement item replacement, until actual
replacements occur. When actual retirement item replacement occurs, this
account is reduced by the amount of the actual expense.

**SOURCE:** Vendor invoices

**COMMENTS:**

This account can be successfully implemented only when agencies
establish working capital funds. The amount in this account will
increase or decrease as reserves are accumulated or overhauls are paid
for.

It is important that agencies operating aircraft through year specific
appropriations understand the concept of reserves even though they will
not have reserve accounts set up in their official accounting system.
They will need to calculate what the reserves would be for each
accounting period and report these expenditures in the cost comparisons
and cost reporting required by OMB and GSA.

Recording the transaction is as shown above for \"Reserve-Engine
Overhaul\"

**A-126:** Not Applicable

**A-76:** Not Applicable

**FAIRS:** Not Applicable

**OBJECT CLASS:** 11.X, 12.X, 21.X, 22.X, 23.X, 25.X, and 26.X.

**ITEM: Accrued Liabilities - Funded Payroll and Benefits ACCOUNT:
22100**

**FINANCIAL STATEMENT**: Balance Sheet - Liability

**DEFINITION:**

The estimated liability for salaries and wages of employees that have
been earned but unpaid and amounts of funded annual leave and other
employee benefits which have been earned but are unpaid. This accrual is
to be reversed at the beginning of the subsequent accounting period, and
is supported by the agency\'s payroll system files.

**SOURCE:** Payroll records of earned but unpaid salaries, wages,
benefits, and annual leave.

**COMMENTS:**

This account is only used at the end of an accounting cycle (ie.
month-end, quarter-end, or year-end). The payroll system must be able to
provide a value of these costs that can be prorated over the various
expense accounts. The proration should be based on the best estimate of
what the employees have been working on during the unpaid period, or a
statistical analysis of what the costs have been charged to in the
recent pay periods.

At the end of an accounting cycle the posting should be:

> **Debit** the various expense accounts in the 60000 series
>
> **Credit** this account

At the beginning of the next accounting cycle the posting would be a
reversal of the above entry.

**A-126:** Not applicable

**A-76:** Not applicable

**FAIRS:** Not applicable

**OBJECT CLASS:** Not applicable to this account

**ITEM: Unearned Revenues - Advances from Others ACCOUNT: 23100**

**FINANCIAL STATEMENT:** Balance Sheet - Liability

**DEFINITION:**

The balance of amounts advanced by other federal and non-federal
entities for goods and services to be furnished (but not as yet
delivered).

**SOURCE:** Collections received as the result of service agreements for
future goods and services to be furnished.

**COMMENTS:**

When a customer desires to advance money for future services based on a
service agreement, the aviation activity should have the processes to
handle the advance. The funds are received into the aviation cash
account (10100 Fund Balance with Treasury) and a liability is set up in
this account. When the services are performed and a bill is issued, the
bill is liquidated from this account.

When the funds are received:

> **Debit** account 10100
>
> **Credit** this account, a subsidiary file must be maintained for each
> customer that has made advance payments

After the service has been provided and a bill has been issued (an
Accounts Receivable 13100 has been set up)**:**

> **Debit** this account for the amount of the outstanding Accounts
> Receivable for this customer
>
> **Credit** Accounts Receivable and the appropriate subsidiary file

**A-126:** Not applicable

**A-76**: Not applicable

**FAIRS:** Not applicable

**OBJECT CLASS:** Not applicable to this account

**ITEM: Other Liabilities ACCOUNT: 29000**

**Summary Account**

**FINANCIAL STATEMENT:** Balance Sheet - Liability

**DEFINITION:**

This account is a summary account that can be used for liabilities
(i.e., amounts owed to others) that don't fit any other category of
liability. The two that are used in the sample chart of accounts are a
"self insurance reserve" and a "capital lease liability".

**SOURCE:** This is a summary account. Posting is done to accounts
29200 - 29300

**COMMENTS:**

For details of how to use this account, see the posting accounts 29200
and 29300

**A-126:** Not applicable

**A-76**: Not applicable

**FAIRS:** Not applicable

**OBJECT CLASS:** Not applicable

**ITEM: Other Liabilities - Self Insurance Reserves ACCOUNT: 29200**

**FINANCIAL STATEMENT:** Balance Sheet - Liability

**DEFINITION:**

A reserve account that accumulates the periodic expense amount from
account 69011 and 69012 for aircraft hull and liability insurance, until
an actual accident or hull damaging incident occurs. When an aircraft is
damaged or a liability is incurred as a result of an accident the cost
is charged to this account.

**SOURCE:** Vendor invoices, Payroll costs, Historical data.

**COMMENTS:**

This account can be successfully implemented only when an agency has
established a Working Capital Fund. The amount in this account will
increase as reserves are accumulated or decrease as aircraft repairs or
liability costs are paid for.

The entries required to record the accumulation of funds in the reserve
account are:

> **Debit** the expense account 69011 and 69012 on at least a monthly
> basis
>
> **Credit** this account

At the time of the aircraft accident repair or liability payment, the
entries are:

> **Debit** this account
>
> **Credit** Accounts Payable account 21100

**A-126:** Not applicable

**A-76**: Not applicable

**FAIRS:** Not applicable

**OBJECT CLASS:** 11.XX, 12.XX, 21.XX, 22.XX, 25.XX, and 26.XX,

**ITEM: Capital Lease Liability ACCOUNT: 29300**

**FINANCIAL STATEMENT**: Balance Sheet - Liability

**DEFINITION:**

The present value of liabilities for assets acquired under a lease
agreement which meets the test for capitalizing the assets.

**SOURCE:** The contractual document that establishes the lease
agreement, and subsequent payment documents that pay down the
outstanding lease payable.

**COMMENTS:**

Capital lease arrangements are a unique type of liability and therefore
this payable is kept in its own liability and not mixed with all other
payables in Accounts Payable account 21100.

To establish the account:

> **Debit** the account 18110 or 18120 (Assets Under Capital Lease,
> Aircraft or Other Assets as appropriate)
>
> **Credit** this account

As lease payments are made:

> **Debit** this account
>
> **Credit** the cash account (Fund Balance with Treasury account 10100)

When an asset purchased under a capital lease is fully paid for (this
account has been reduced to zero for that particular asset), then an
additional posting needs to occur. The asset value and the attendant
accumulated depreciation must be transferred from the \"Capital Lease\"
accounts 18110, 18120, and 18190 to the appropriate asset accounts in
the 17XXX series.

**A-126:** Not applicable

**A-76**: Not applicable

**FAIRS**: Not applicable

**OBJECT CLASS:** Not applicable to this liability account

**ITEM: Unexpended appropriations ACCOUNT: 31000**

**FINANCIAL STATEMENT**: Balance Sheet -- Net Position

**DEFINITION:**

Amounts of money that have been appropriated (i.e. authorized by
Congress) but that have not yet been spent during the accounting period
or fiscal year.

**SOURCE:** The difference between the appropriations for the agency and
its expenditures

**COMMENTS:**

This account should be used if an agency has acquired goods or services
for less cost than was authorized by the appropriation for these goods
or services.

**A-126:** Not applicable

**A-76**: Not applicable

**FAIRS**: Not applicable

**OBJECT CLASS:** Not applicable to Equity accounts

**ITEM: Transfers in or out of assets ACCOUNT: 32000**

**Summary Account**

**FINANCIAL STATEMENT**: Balance Sheet -- Net Position

**DEFINITION:**

The net book value, or the estimated fair market value, of property
transferred-in from another Federal activity or transferred to another
Federal activity without reimbursement.

**SOURCE:** This is a summary account. Posting is done to accounts 32200
and 32300.

**COMMENTS:**

This is the account that allows property to be transferred-in or out of
an agency and capitalized in the Asset section of the Balance Sheet or
removed from the Balance Sheet. This is the contra account to the
capitalized property accounts, thereby allowing the entry directly into
the asset section and not causing the Balance Sheet to go out of
balance. Without an account like this in the Equity section, the contra
to a property transfer would end up in the Income Statement as an
extraordinary receipt or expense, causing the Income Statement for the
current period to be distorted by an entry that did not come about
through normal operations of the aviation activity.

See accounts 17510 and 17530 for the posting procedures.

**A-126:** Not applicable

**A-76**: Not applicable

**FAIRS**: Not applicable

**OBJECT CLASS:** Not applicable to Equity accounts

**ITEM: Transfers-in from Others without Reimbursement ACCOUNT: 32200**

**FINANCIAL STATEMENT**: Balance Sheet -- Net Position

**DEFINITION:**

The net book value, or the estimated fair market value, of property
transferred-in from another Federal activity without reimbursement.

**SOURCE:** The property transfer document.

**COMMENTS:**

This is the account that allows property to be transferred-in and
capitalized in the Asset section of the Balance Sheet. This is the
contra account to the capitalized property accounts, thereby allowing
the entry directly into the asset section and not causing the Balance
Sheet to go out of balance. Without an account like this in the Equity
section, the contra to a property transfer would end up in the Income
Statement as an extraordinary receipt, causing the Income Statement for
the current period to be distorted by an entry that did not come about
through normal operations of the aviation activity.

See accounts 17510 and 17530 for the posting procedures.

**A-126:** Not applicable

**A-76**: Not applicable

**FAIRS**: Not applicable

**OBJECT CLASS:** Not applicable to Equity accounts

**ITEM: Transfers-out to Others without Reimbursement ACCOUNT: 32300**

**FINANCIAL STATEMENT**: Balance Sheet -- Net Position

**DEFINITION:**

The net book value of property transferred-out to another Federal
activity without reimbursement.

**SOURCE:** The property transfer document.

**COMMENTS:**

If the aviation activity has not obtained the authorization to sell
replaced assets, then when it is time to get rid of an aircraft or other
asset it most likely will be declared excess. When an excess asset is
picked up by another organization it needs to be removed from the books
of the original aviation organization. A property disposal of this type
creates a reduction in the assets and therefore must also create a
reduction in the Net Position (Equity) section of the balance sheet.
(Note that aviation activities that so desire can generally request and
obtain authority to sell assets that are no longer needed and apply the
proceeds to the acquisition of a new aircraft or components. If a sale
is the method of disposal, then use accounts 71100 and 72100 for the
proper posting).

A disposal by transferring-out will be posted as follows:

> **Debit** the accumulated depreciation account for the amount of
> depreciation
>
> on that asset

**Credit** the asset account for the capitalized value of the asset and

> **Debit** this account for the difference between the first entries
> (this must cause the debits and the credits to equal)

**A-126:** Not applicable

**A-76**: Not applicable

**FAIRS**: Not applicable

**OBJECT CLASS:** Not applicable to Equity accounts

**ITEM: Equity - Cumulative Results of Operations ACCOUNT: 33000**

**FINANCIAL STATEMENT**: Balance Sheet - Equity

**DEFINITION:**

This account reflects the cumulative net results of operations. This is
the net difference since the inception of the aviation activity between
(1) expenses and losses and (2) financing sources including the
initialization appropriation, revenues and gains.

**SOURCE:** Any warrant that transferred the initialization
appropriation, as well as the annual net income or loss as reflected on
the Income Statement.

**COMMENTS:**

The more common name for this account is Retained Earnings. This account
is maintained to reflect the balance of net income or loss resulting
from the aviation operations from inception to the date of the Balance
Sheet.

The Income Statement preparation results in all revenue and expense
accounts to be closed on an annual basis, the contra to all these
closing entries are posted to this account. Thereby causing this account
to reflect the cumulative net income and/or net loss from all past
operating years.

**A-126:** Not applicable

**A-76**: Not applicable

**FAIRS**: Not applicable

**OBJECT CLASS:** Not applicable to Equity accounts.

**ITEM: Budgetary ACCOUNT: 40000**

**FINANCIAL STATEMENT**: Not applicable

**DEFINITION:**

These accounts reflect budgetary operations and conditions from the time
appropriations are realized until they are expended.

**SOURCE:** Annual appropriations budgets and approved operating plans.

**COMMENTS:**

The accounts in the 40000 series are designed to track the warranted
funds that are provided to an operation that operates on annual
appropriations provided by the Federal budget process. Each aviation
activity may designate as many budgetary accounts as they desire. Look
to your own agency's financial and budget people for guidance on how
many accounts are required for the aviation activity. The budgetary
accounts must always equal a zero when they are all added together; that
is, there must be at least two accounts that offset each other with an
equal amount of debits and credits. The accounts set up in this series
may be many, however, when all the debit account balances are
accumulated they must equal the total of all the credit account
balances. This process keeps the Budgetary accounts from having an
affect on the Balance Sheet or the Income Statement.

**A-126:** Not applicable

**A-76:** Not applicable

**FAIRS:** Not applicable

**OBJECT CLASS:** Not applicable to Budgetary accounts.

## ITEM: Revenue from Services Provided ACCOUNT: 52000

Summary Account

**FINANCIAL STATEMENT**: Income Statement - Revenues

**DEFINITION:**

Revenue earned from the sale of aviation services provided to other
Federal agencies, state or local government units or commercial
customers.

**SOURCE:** This is a summary account. Posting is done to accounts
52100 - 52400.

**COMMENTS:**

This account allows the agency to properly record the revenues obtained
from others for aviation services rendered under contractual agreements
or on an ad-hoc basis.

**A-126:** Not applicable

**A-76:** Not applicable

**FAIRS:** Not applicable

**OBJECT CLASS:** Not applicable to revenue accounts.

**ITEM: Revenue from Government Agencies ACCOUNT: 52100**

**FINANCIAL STATEMENT**: Income Statement - Revenues

**DEFINITION:**

Revenue earned from the sale of aviation services provided to Federal
agency customers.

**SOURCE:** Records of service provided to individual customers.

**COMMENTS:**

When a record of an aviation service enters the aviation activity\'s
finance system, it will calculate the dollar value of the service
provided and create a bill to the using agency. The amount of that bill
is then recorded as a revenue in this account, while at the same time
creating an Accounts Receivable record in account 13100.

The posting of this transaction was previously addressed on the page for
account 13100.

**A-126:** Not applicable

**A-76:** Not applicable

**FAIRS:** Not applicable

**OBJECT CLASS:** Not applicable to revenue accounts.

**ITEM: Revenue from State Agencies ACCOUNT: 52200**

**FINANCIAL STATEMENT**: Income Statement - Revenues

**DEFINITION:**

Revenue earned from the sale of aviation services provided to state
agency customers.

**SOURCE:** Records of service provided to individual customers.

**COMMENTS:**

When a record of an aviation service enters the aviation activity\'s
finance system, it will calculate the dollar value of the service
provided and create a bill to the using state agency. The amount of that
bill is then recorded as a revenue in this account, while at the same
time creating an Accounts Receivable record in account 13100.

The posting of this transaction was previously addressed on the page for
account 13100.

**A-126:** Not applicable

**A-76:** Not applicable

**FAIRS:** Not applicable

**OBJECT CLASS:** Not applicable to revenue accounts.

**ITEM: Revenue from Foreign Governments ACCOUNT: 52300**

**FINANCIAL STATEMENT**: Income Statement - Revenues

**DEFINITION:**

Revenue earned from the sale of aviation services provided to foreign
government customers.

**SOURCE:** Records of service provided to individual customers**.**

**COMMENTS:**

When a record of an aviation service enters the aviation activity\'s
finance system, it will calculate the dollar value of the service
provided and create a bill to the using foreign government. The amount
of that bill is then recorded as a revenue in this account, while at the
same time creating an Accounts Receivable record in account 13100.

The posting of this transaction was previously addressed on the page for
account 13100.

**A-126:** Not applicable

**A-76:** Not applicable

**FAIRS:** Not applicable

**OBJECT CLASS:** Not applicable to revenue accounts.

**ITEM: Other Revenues ACCOUNT: 52400**

**FINANCIAL STATEMENT**: Income Statement - Revenues

**DEFINITION:**

All sources of revenue from all customers that did not fit the
definitions listed in the previous three revenue accounts (52100, 52200,
and 52300).

**SOURCE:** Records of service provided to individual customers**.**

**COMMENTS:**

When a record of an aviation service enters the aviation activity\'s
finance system, it will calculate the dollar value of the service
provided and create a bill to the user. The amount of that bill is then
recorded as a revenue in this account, while at the same time creating
an Accounts Receivable record in account 13100.

The posting of this transaction was previously addressed on the page for
account 13100.

**A-126:** Not applicable

**A-76:** Not applicable

**FAIRS:** Not applicable

**OBJECT CLASS:** Not applicable to revenue accounts.

**ITEM: Fuel and additives ACCOUNT: 61110**

Summary Accounts

**FINANCIAL STATEMENT:** Income Statement - Expense

**DEFINITION:**

A variable cost that includes aviation gasoline and jet fuel and fuel
additives (i.e. water methanol, ionized water and Prist). Depending on
the fuel type (bulk or retail) and acquisition process (from a federal
source or a commercial one), etc., one of the following posting accounts
will be used:

61110 Fuel and additives

61112 Fuel and additives -- Bulk (Commercial)

61113 Fuel and additives -- Bulk (Federal)

61114 Fuel and additives -- Retail (Commercial)

61115 Fuel and additives -- Retail (Federal)

**SOURCE:** Fuel Charge Slip (retail purchases)

Fuel Slip: Gallons X Dollar/Gallon for bulk and contract fuel.
(Dollar/Gallon for bulk or contract fuel obtained from applicable
contract.)

Enter cost for each fuel purchase.

**COMMENT:**

Consider your agency\'s requirement for fuel information. If you require
more than one account, expand by adding sub accounts. For example, if
you buy fuel in both retail and bulk from commercial sources and the
difference is important to know, then you could use 61114 for retail and
61112 for bulk.

Recording this transaction is accomplished as follows for a retail fuel
purchase:

**Debit** Fuel and additives/Fuel and additives - Retail (Expense
Account 61114 or 61115)

**Credi**t Accounts Payable (Liability Account 21100)

When the invoice for this fuel is paid,

**Debit** Accounts Payable (Liability Account 21100)

**Credit** Cash (Asset Account 10100)

If the fuel was obtained from the agency\'s fuel tank farm (inventory),
proceed as follows:

**Debit** Fuel and additives/Fuel and additives -Bulk (Federal) (Expense
Account 61113)

**Credit** Inventory for Agency Operations/Fuel (Asset Account 15110)

To record the purchase of fuel in bulk for the agency\'s fuel farm,
record it as follows:

**Debit** Inventory for Agency Operations/Fuel (Asset Account 15110)

**Credit** Accounts Payable (Liability Account 21100)

**A-126:** Fuel and Other Fluids

**A-76:** 1, 20j

**FAIRS:** 40, 41, 56, 57

**OBJECT CLASS:** 26.XX

**ITEM: Lubricants and oil ACCOUNT: 61120**

Summary Accounts

**FINANCIAL STATEMENT:** Income Statement - Expense

**DEFINITION:**

A variable cost that includes all lubricants and oils (i.e. hydraulic
fluid, oil, grease and other lubricants). Depending on the acquisition
process (from a federal source or a commercial one), etc., one of the
following posting accounts will be used:

61120 Lubricants - Oil

61122 Lubricants - Commercial

61124 Lubricants -- Federal

**SOURCE:** Vendor invoice or fuel charge slip (retail purchases). Enter
cost for each fuel purchase.

**COMMENT:**

Consider your agency\'s requirement for information on lubricants. In
addition to recording the cost of lubricants by whether they are
acquired commercially or from another federal agency, you may want to
record by type - grease, oil and hydraulic fluid. To do this, it is easy
to create sub accounts that allow this separation. (For example, in the
sample chart of accounts in chapter 4, accounts 61121, 61123 and 61125
through 61129 are available).

Recording this transaction is accomplished as follows for a retail
purchase:

**Debit** Lubricants and oil - Commercial (Expense Account 61122)

**Credi**t Accounts Payable (Liability Account 21100)

When the invoice for this fuel is paid,

**Debit** Accounts Payable (Liability Account 21100)

**Credit** Cash (Asset Account 10100)

**A-126:** Fuel and Other Fluids

**A-76:** 1, 20j

**FAIRS:** 40, 41, 56, 57

**OBJECT CLASS:** 26.XX

**ITEM: Variable Lease Costs ACCOUNT: 61130**

**Summary Account**

**FINANCIAL STATEMENT:** Income Statement - Expense

**DEFINITION:**

When the basis for leasing an aircraft is hours flown, then the
associated rental or lease costs are classified as variable costs.

**SOURCE:** This is a summary account. The posting accounts are 61132
and 61134

**COMMENTS:**

A lease or rental agreement may contain a daily or monthly charge in
addition to the hourly rate. A Governmental agency should consider the
portion of the agreement that is based on calendar duration as fixed
cost.

**A-126:** Not Applicable

**A-76:** Not Applicable

**FAIRS:** Not Applicable

**OBJECT CLASS:** Not Applicable

**ITEM: Variable Lease Costs ACCOUNT: 61132**

**61134**

**FINANCIAL STATEMENT:** Income Statement - Expense

**DEFINITION:**

When the basis for leasing an aircraft is hours flown, then the
associated rental or lease costs are classified as variable costs. This
applies whether the aircraft is leased from a commercial source (61132)
or another federal agency (61134)

**SOURCE:** The lease or rental agreement should contain the **cost per
hour flown**. Another source needed is the aircraft log book or other
documentation that contains the number of hours flown.

**COMMENTS:**

The lease or rental agreement may contain a daily or monthly charge in
addition to the hourly rate. A Governmental agency should consider the
portion of the agreement that is based on a calendar duration as fixed
cost and classify the amount in account 61142 or 61144.

This transaction is recorded as follows:

**Debit** Variable Lease Cost (Expense Account 61132 or 61134)

**Credit** Accounts Payable (Liability Account 21100)

When the invoice is paid, debit the accounts payable and credit the cash
account

**A-126:** Lease Cost - Variable

**A-76:** 3, 18

**FAIRS:** 103, 104

**OBJECT CLASS:** 25.XX

**ITEM: Fixed Lease Costs ACCOUNT: 61140**

**Summary Account**

**FINANCIAL STATEMENT:** Income Statement - Expense

**DEFINITION:**

A Governmental agency should consider lease costs as fixed when the
rental or lease agreement is based on a length of time (e.g. days,
weeks, months, or years) and does not vary according to aircraft usage.

**SOURCE:** This is a summary account. Posting accounts are 61142 and
61142

**COMMENTS:**

The lease or rental agreement may contain an amount or charge based on
the number of hours flown. Government agencies should classify this
portion of the agreement as variable lease cost.

**A-126:** Not applicable

**A-76:** Not applicable

**FAIRS:** Not applicable

**OBJECT CLASS:** Not applicable

**ITEM: Fixed Lease Costs ACCOUNT: 61142**

**61144**

**FINANCIAL STATEMENT:** Income Statement - Expense

**DEFINITION:**

A Governmental agency should consider lease costs as fixed when the
rental or lease agreement is based on a length of time (e.g. days,
weeks, months, or years) and does not vary according to aircraft usage.
This applies whether the aircraft is leased from a commercial source
(61142) or another federal agency (61144)

**SOURCE:** The lease or rental agreement will contain the necessary
information (cost per day, cost per month or cost per year) to record
the correct amount in the accounting system.

**COMMENTS:**

The lease or rental agreement may contain an amount or charge based on
the number of hours flown. Government agencies should classify this
portion of the agreement as variable lease cost, account 61132
(commercial) or 61134 (federal). This portion of the cost should be
recorded as discussed above for Variable Lease Cost, account 61132 and
61134.

Recording the fixed portion of the lease is done as follows:

**Debit** Fixed Lease Cost (Expense Account 61142 or 61144)

**Credit** Accounts Payable (Liability Account 21100)

When the invoice is paid, debit the accounts payable and credit the cash
account

If the asset is on a \"capital lease\", account 61142/44 is not used,
see account 18110 or 18120 and 29300.

**A-126:** Lease Costs - Fixed

**A-76:** 11, 20A

**FAIRS:** 36, 37

**OBJECT CLASS:** 25.XX

**ITEM: Variable Crew Costs ACCOUNT: 61150**

Summary Account

**FINANCIAL STATEMENT:** Income Statement - Expense

**DEFINITION:**

Crew costs which vary according to aircraft usage and would include the
wages of crew members hired on an hourly or part-time basis, all crew
overtime charges, and all crew travel expenses, particularly
subsistence,(i.e., per diem, laundry, fees, etc.). This applies
regardless of whether the expense is incurred with a commercial vendor
or with a federal agency.

If the expenditure is associated with travel use 61152 (commercial) or
61153 (federal). If the expenditure involves wages for part-time
personnel or overtime payment, use 61154 (commercial) or 61155 (federal)

**SOURCE:** For Crew Wages: Flight Log, Time Card, Contract Agreement
with crew member

Travel Expenses: Travel Expense vouchers in the appropriate Government
format.

**COMMENTS:**

The costs associated with this account, 61152, 61153, 61154 and 61155,
do **not** include the cost for full -time pilots that are identified in
account 61160. This account does however, include overtime and travel
costs for both part-time and full-time pilots.

This transaction is recorded as follows:

**Debit** Variable Crew Cost (Expense Account 61152 or 61153 for travel
and 61154 or 61155 for wages, benefits, and other costs associated with
part-time pilots; also charge all pilot overtime to 61154 or 61155)

**Credit** Accounts Payable (21100 for travel and other costs: and
Accrued Liability Payroll 22100 for all salary, benefits, and overtime)

When the invoice is paid, debit the accounts payable and credit the cash
account.

**A-126:** Crew Costs - Variable

**A-76:** 2, 19g

**FAIRS:** 101, 102

**OBJECT CLASS:** Travel - 21.XX

Overtime - 11.5X

Part Time Wages - 11.3X

Benefits - 12.XX

**ITEM: Fixed Crew Costs ACCOUNT: 61160**

Summary Account

**FINANCIAL STATEMENT:** Income Statement - Expense

**DEFINITION:**

Flight crew member costs that do not vary according to aircraft usage.
Costs include salaries of full time or fixed tour of duty crew members,
benefits, training costs, charts, personal protective equipment,
uniforms, and other personal equipment. Post to individual accounts
61162, 61164, and 61166 if these costs are incurred with commercial
contractors or 61163, 61165 and 61167 if these costs are incurred with
federal agencies. The account also includes the costs for crew members
who perform minimal maintenance, if they are primarily flight crew
members.

**SOURCE:** For Salaries and Benefits - Payroll records, time cards,
employee contract

For Training Costs - Invoice from training source

For Other Costs - Invoices from outside sources that demonstrate
authenticity of charges.

**COMMENTS:**

According to each agency\'s requirements, the sub accounts supporting
Fixed Crew Costs can vary. The sample chart of accounts in section 4.2.1
suggests three sub accounts, salaries and benefits, training costs, and
other costs associated with crew. Training costs could include travel to
and from training site, per diem, course fees, etc.

If the expense is salaries and benefits it should be recorded as
follows:

**Debit** Fixed Crew Cost/Wages and Benefits (Expense Account 61162 or
61163)

**Credit** Accrued Liabilities/Payroll and Benefits (Liability Account
22100)

When the salaries are paid, debit the accrued liabilities account and
credit the cash account

If the expense is, for example, training costs, proceed as follows:

**Debit** Fixed Crew Cost/Training Costs (Expense Account 61164 or
61165)

**Credit** Accounts Payable (Liability Account 21100)

When the invoice is paid, debit the accounts payable and credit the cash
account

**A-126:** Crew Costs - Fixed

**A-76:** 9, 20b

**FAIRS:** 34, 35

Salaries - 11.1X

Benefits - 12.1X

Training - 25.XX

Charts, Protective Eq,Etc - 26.XX

**ITEM: Flight Support Costs ACCOUNT: 61170**

Summary Account

**FINANCIAL STATEMENT:** Income Statement - Expense

**DEFINITION:**

Government agencies should classify the landing, tie-down fees, air
traffic control fees and ground handling associated with the usage of
aircraft as variable when they are encountered at a location other than
the normal base of operation and are directly incurred as a result of a
flight of the aircraft. Account 61172 is used for amounts paid to a
commercial vendor and 61174 is used when payment is made to a federal
agency.

Agencies should consider tie-down fees and other flight support costs
for an aircraft at its normal base as part of operations overhead, which
is a fixed cost (account number 61510 - 61580)

**SOURCE:** Invoice from location where Government agency encountered
landing and tie-down fees.

**COMMENTS:**

Government agencies should classify the landing and tie-down fees
encountered at the main base of operations or fees based on a length of
time (i.e. week, month, annual, etc.) as operations overhead.

Recording this transaction is accomplished as follows:

**Debit** **Flight Support Costs (Commercial) or (Federal)** (Expense
Account 61172 or 61174)

**Credi**t Accounts Payable (Liability Account 21100)

When the invoice for this fuel is paid,

**Debit** Accounts Payable (Liability Account 21100)

**Credit** Cash (Asset Account 10100)

**A-126:** Landing & Tie-down Fees

**A-76:** 4, 20f, 20i

**FAIRS:** 38, 39

**OBJECT CLASS:** 25.XX

**ITEM: Ground Servicing ACCOUNT: 61180**

Summary Account

**FINANCIAL STATEMENT:** Income Statement - Expense

**DEFINITION:**

Government agencies should classify the costs of towing, cleaning, air
conditioning servicing, oxygen system servicing, lavatory servicing,
etc. associated with the usage of aircraft as variable when they are
encountered at a location other than the normal base of operation and
are directly incurred as a result of a flight of the aircraft. Account
61182 and 61186 are used for amounts paid to a commercial vendor and
61184 and 61188 are used when payment is made to a federal agency.

Agencies should consider these costs for an aircraft at its home base of
operations as part of operations overhead, which is a fixed cost
(account number 61510 - 61580)

**SOURCE:** Invoice from location where Government agency encountered
ground servicing fees.

**COMMENTS:**

Government agencies should classify the ground servicing fees
encountered at the main base of operations or fees based on a length of
time (i.e. week, month, annual, etc.) as operations overhead.

Recording this transaction is accomplished as follows:

**Debit** **Ground Servicing (Commercial) or (Federal)** (Expense
Account 61182 or 61184)

**Credi**t Accounts Payable (Liability Account 21100)

When the invoice is paid,

**Debit** Accounts Payable (Liability Account 21100)

**Credit** Cash (Asset Account 10100)

**A-126:** Landing & Tie down Fees

**A-76:** 4, 19f, 19i

**FAIRS:** 42, 43, 69, 70

**OBJECT CLASS:** 25.XX

**ITEM: Variable Maintenance Costs ACCOUNT: 61200**

Summary Account

**FINANCIAL STATEMENT:** Income Statement - Expense

**DEFINITION:**

Variable maintenance costs include scheduled and unscheduled maintenance
that occurs based on the accumulation of hours flown or flight cycles as
well as maintenance and repairs of items found during a scheduled
maintenance inspection or squawked by the crews. In addition to the
costs of normal maintenance activities, examples of costs that
Government agencies should consider as variable are modification
required by service bulletins and airworthiness directives.

Engine overhaul, aircraft refurbishment, and major component rebuild and
overhauls may be in this variable maintenance category when the
governmental unit does not have the ability to set reserve accounts
(i.e. WCF). *See accounts 21500 \-- 21515 and 69500 \-- 69526.*

**NOTE:** Government agencies may consider all maintenance costs as
variable although some maintenance costs more closely resemble fixed
costs; costs that occur based on a length of time, (i.e. days, weeks,
monthly or annual). This is an important distinction when performing an
A-126 or A-76 analysis.

**SOURCE:** Time cards, work orders, vendor invoices

**COMMENTS:**

The requirements outlined in Circular A-76, A-126 and FAIRS require
Government agencies to break variable maintenance costs down into
further categories, labor, parts, and maintenance contracts. Account
descriptions for those categories follow.

**A-126:** See Account 61210 -- 61254

**A-76:** See Account 61210 - 61254

**FAIRS:** See Account 61210 - 61254

**OBJECT CLASS:** See Account 61210 \-- 61254

**ITEM: Variable Maintenance Costs - Labor ACCOUNT: 61210**

Summary Account

**FINANCIAL STATEMENT:** Income Statement - Expense

**DEFINITION:**

Variable Maintenance Labor includes the costs expended by the Government
agency for in-house mechanics, technicians, and inspectors when they are
performing maintenance tasks. Posting accounts are 61212 \-- 61219
dependent on type of labor costs and whether the payee is a federal
entity or a commercial entity, as follows:

61212 Wages and Benefits - Scheduled Maintenance (Commercial)

61213 Wages and Benefits - Scheduled Maintenance (Federal)

61214 Wages and Benefits - Unscheduled Maintenance (Comm.)

61215 Wages and Benefits - Unscheduled Maintenance (Federal)

61216 Training (Commercial)

61217 Training (Federal)

61218 Other cost associated with labor (Comm.)

61219 Other cost associated with labor (Federal)

Examples of costs associated with the above maintenance personnel are
salaries, benefits, training, travel, etc. Costs **not** included in the
account are the labor costs associated with overhauls (accounts 21500
and 21510), refurbishment (account 21505), and other major maintenance
for which Government agencies have established reserve accounts (account
21515). For aviation activities that do not have the opportunity to set
reserve accounts (21500 throught 21515); the overhaul, refurbishment,
rebuild, and retirement item costs use accounts 61260 throught 61290.
Labor costs associated with maintenance contracts also are **not**
included in this account. (See account 61250 -- 61254 for costs
associated with maintenance contracts.)

**SOURCE:** Work orders, timecards, payroll, vendor invoices for travel
and training

**COMMENTS:**

Depending upon the size of the organization, Government agencies can
expand account 61200. They can do so as illustrated in the Chart of
Accounts in Section 4.2.1, by developing sub accounts that collect labor
by wages, benefits, training, etc. If the agency requires more detail
for internal reporting requirements, they could break down the costs
further into unscheduled, scheduled, engines and avionics, as portrayed
in the sample chart of accounts referenced previously. Note that
Circular A-76 requires a separate cost category for unscheduled
maintenance. Note that Circular A-126 allows charging two labor costs as
fixed costs (maintenance labor costs incurred for a calendar-based
inspection, as well as labor costs that are not incurred for specific
maintenance tasks). Recording this expense is done in the same manner as
is done for Fixed Crew Costs (Account 61160)

**A-126:** Maintenance Labor - Variable

**A-76:** 5a

**FAIRS:** 87, 88, 97, 98

**OBJECT CLASS:** Salaries - 11.1X

Benefits - 12.1X

Training - 25.XX

Travel - 21.XX

**ITEM: Variable Maintenance Costs -- Parts Airframe ACCOUNT: 61220**

Summary Account

**FINANCIAL STATEMENT:** Income Statement - Expense

**DEFINITION:**

Variable maintenance parts includes the cost of materials and parts
consumed during maintenance and inspections. (See chart of accounts
61221 -- 61227). The account does **not** include the costs associated
with component or engine overhauls, refurbishment, and any major
maintenance for which Government agencies have established reserve
accounts. Part costs associated with maintenance contracts also are
**not** included in this account. (See account 61250 -61254 for costs
associated with maintenance contracts.) Examples of costs recorded in
this category are bearings, packings, filters, gears, consumables, etc.
Parts may come from vendors or from the agency\'s inventory.

**SOURCE:** Work orders, vendor invoices, inventory/parts room issues

**COMMENTS:**

The suggested chart of accounts in Section 4.2.1 illustrates an approach
for establishing sub-accounts by collecting costs according to scheduled
and unscheduled parts for the airframe, as well as by type of vendor
(commercial or federal). It is important to remember to identify the
output requirements, and then develop a system that satisfies the
requirements. A final issue to consider involves materiality \-- do not
track costs to such a degree that the cost of tracking exceeds the
benefits of knowledge gained. Some material such as rags, paint remover,
and other shop supplies are more appropriately classified as overhead.

Recording this transaction is accomplished as follows for a retail
purchase:

**Debit Variable Maintenance Costs -- Parts Airframe** (Expense Account
61220)

**Credi**t Accounts Payable (Liability Account 21100)

When the invoice is paid,

**Debit** Accounts Payable (Liability Account 21100)

**Credit** Cash (Asset Account 10100)

If the part was obtained from the agency\'s parts inventory, proceed as
follows:

**Debit** **Variable Maintenance Costs -- Parts Airframe** (Expense
Account 61220)

**Credit** Inventory for Agency Operations/Parts (Asset Account 15120)

To record the purchase of parts for the agency\'s parts inventory,
record it as follows:

**Debit** Inventory for Agency Operations/Parts (Asset Account 15120)

**Credit** Accounts Payable (Liability Account 21100)

**A-126:** Maintenance Parts - Variable

**A-76:** 5b

**FAIRS:** 89, 90, 99, 100

**OBJECT CLASS:** Parts - 26.XX

**ITEM: Variable Maintenance Costs -- Parts Avionics ACCOUNT: 61230**

Summary Account

**FINANCIAL STATEMENT:** Income Statement - Expense

**DEFINITION:**

Variable maintenance parts avionics includes the cost of materials and
parts consumed during maintenance and inspections. (See chart of
accounts 61231 -- 61237). The account does **not** include the costs
associated with component or engine overhauls, refurbishment, and any
major maintenance for which Government agencies have established reserve
accounts. Part costs associated with maintenance contracts also are
**not** included in this account. (See account 61250 -61254 for costs
associated with maintenance contracts.) Examples of costs recorded in
this category are gauges, radios, "black boxes,"etc. Parts may come from
vendors or from the agency\'s inventory.

**SOURCE:** Work orders, vendor invoices, inventory/parts room issues

**COMMENTS:**

The suggested chart of accounts in Section 4.2.1 illustrates an approach
for establishing sub-accounts by collecting costs according to scheduled
and unscheduled avionics parts, as well as by type of vendor (commercial
or federal). It is important to remember to identify the output
requirements, and then develop a system that satisfies the requirements.
A final issue to consider involves materiality \-- do not track costs to
such a degree that the cost of tracking exceeds the benefits of
knowledge gained. Some material such as wire-wraps, connectors and other
shop supplies are more appropriately classified as overhead.

Recording this transaction is accomplished as follows for a retail
purchase:

**Debit Variable Maintenance Costs -- Parts Avionics** (Expense Account
61230)

**Credi**t Accounts Payable (Liability Account 21100)

When the invoice is paid,

**Debit** Accounts Payable (Liability Account 21100)

**Credit** Cash (Asset Account 10100)

If the part was obtained from the agency\'s parts inventory, proceed as
follows:

**Debit** **Variable Maintenance Costs -- Parts Avionics** (Expense
Account 61230)

**Credit** Inventory for Agency Operations/Parts (Asset Account 15120)

To record the purchase of parts for the agency\'s parts inventory,
record it as follows:

**Debit** Inventory for Agency Operations/Parts (Asset Account 15120)

**Credit** Accounts Payable (Liability Account 21100)

**A-126:** Maintenance Parts - Variable

**A-76:** 5b

**FAIRS:** 89, 90, 99, 100

**OBJECT CLASS:** Parts - 26.XX

**ITEM: Variable Maintenance Costs -- Parts Engine ACCOUNT: 61240**

Summary Account

**FINANCIAL STATEMENT:** Income Statement - Expense

**DEFINITION:**

Variable maintenance parts engines includes the cost of materials and
parts consumed during maintenance and inspections of the engines. (See
chart of accounts 61241 -- 61247). The account does **not** include the
costs associated with engine overhauls, refurbishment, and any major
maintenance for which Government agencies have established reserve
accounts. Part costs associated with maintenance contracts also are
**not** included in this account. (See account 61250 -61254 for costs
associated with maintenance contracts.) Examples of costs recorded in
this category are filters, fuel controllers, ignitors, etc. Parts may
come from vendors or from the agency\'s inventory.

**SOURCE:** Work orders, vendor invoices, inventory/parts room issues

**COMMENTS:**

The suggested chart of accounts in Section 4.2.1 illustrates an approach
for establishing sub-accounts by collecting costs according to scheduled
and unscheduled engine parts, as well as by type of vendor (commercial
or federal). It is important to remember to identify the output
requirements, and then develop a system that satisfies the requirements.
A final issue to consider involves materiality \-- do not track costs to
such a degree that the cost of tracking exceeds the benefits of
knowledge gained. Some material such as wire-wraps, connectors and other
shop supplies are more appropriately classified as overhead.

Recording this transaction is accomplished as follows for a retail
purchase:

**Debit Variable Maintenance Costs -- Parts Engine** (Expense Account
61240)

**Credi**t Accounts Payable (Liability Account 21100)

When the invoice is paid,

**Debit** Accounts Payable (Liability Account 21100)

**Credit** Cash (Asset Account 10100)

If the part was obtained from the agency\'s parts inventory, proceed as
follows:

**Debit** **Variable Maintenance Costs -- Parts Engine** (Expense
Account 61240)

**Credit** Inventory for Agency Operations/Parts (Asset Account 15120)

To record the purchase of parts for the agency\'s parts inventory,
record it as follows:

**Debit** Inventory for Agency Operations/Parts (Asset Account 15120)

**Credit** Accounts Payable (Liability Account 21100)

**A-126:** Maintenance Parts - Variable

**A-76:** 5b

**FAIRS:** 89, 90, 99, 100

**OBJECT CLASS:** Parts - 26.XX

**ITEM: Variable Maintenance Costs - Contracts ACCOUNT: 61250**

Summary Account

**FINANCIAL STATEMENT:** Income Statement - Expense

**DEFINITION:**

Variable contract costs include all costs associated with the
maintenance of the aircraft that are performed by an outside entity,
other than the major maintenance items such as overhauls, retirement
items, refurbishment, etc. and major calendar-based inspections.
Variable contract costs are similar to variable maintenance labor and
part categories except contract costs are external. Repair of
instruments by an outside vendor would be an example of costs classified
in this category. These costs can be incurred with a commercial vendor
(account number 61252) or another federal agency (account number 61254).

**SOURCE:** Vendor invoices

**COMMENTS:**

In some cases, Governmental agencies will not have enough aircraft or
activity or expertise to justify maintenance departments. As a result,
they will establish contracts with outside maintenance entities to
perform the maintenance on their aircraft. Also, agencies with
maintenance departments will occasionally require work from outside
entities for specialized work, major maintenance or when an aircraft is
away from its base and needs maintenance before further flight.
Governmental agencies should classify costs of this nature as variable
contract costs, except if they are incurred as a result of a major
calendar-based inspection. If a contractor does all maintenance work, an
agency will want to expand this cost account to provide more detail with
respect to scheduled and unscheduled work, etc. Vendors will normally
supply this information if requested.

Recording this transaction is accomplished as follows:

**Debit Variable Maintenance Costs - Contracts** **(Commercial) or
(Federal)** (Expense Account 61252 or 61254)

**Credi**t Accounts Payable (Liability Account 21100)

When the invoice for this contract is paid,

**Debit** Accounts Payable (Liability Account 21100)

**Credit** Cash (Asset Account 10100)

**A-126:** Maintenance Contracts - Variable

**A-76:** 5c

**FAIRS:** 83, 84

**OBJECT CLASS:** 25.XX

**ITEM: Engine Overhaul Expense ACCOUNT: 61260**

Summary Account

**FINANCIAL STATEMENT:** Income Statement - Expense

**DEFINITION:**

These accounts do not apply when reserve accounts under a WCF (Working
Capital Fund) have been established by the agency (see Reserve Expense
Accounts 69512 -- 69526 and Reserve Liability Accounts 21500 - 215400).

The costs that should be recorded here are all costs associated with the
heavy maintenance of the engines on the aircraft, including hot section
inspections, overhauls, accessory overhaul and life limited component
replacements. In addition, the repair cost associated with premature
engine removal should be recorded here. This account should not be used
to record routine, minor maintenance expenses for the engine

These costs can be incurred with a commercial vendor (account number
61262) or another federal agency (account number 61264).

**SOURCE:** - Vendor invoices

**COMMENTS:**

When management analyzes the costs in this account, it is important to
take into account the fact that engine overhauls expenses for an
aircraft are incurred only infrequently (for example only every 3 to 8
years for a typical operation). As a result, when calculating the true
cost of operation, it is important to spread the costs incurred in this
account over the total hours or years between overhauls and/or
replacement.

Recording this transaction is accomplished as follows:

**Debit Variable Maintenance Costs -- Engine Overhaul Expense**
**(Commercial) or (Federal)** (Expense Account 61262 or 61264)

**Credi**t Accounts Payable (Liability Account 21100)

When the invoice for this overhaul is paid,

**Debit** Accounts Payable (Liability Account 21100)

**Credit** Cash (Asset Account 10100)

**A-126:** Engine Overhaul, Refurbishment, Major Component Repair

**A-76:** 5d

**FAIRS:** 85, 86

**OBJECT CLASS:** 11.XX, 12.XX, 25.XX or 26.XX

**ITEM: Aircraft Refurbishment Expense ACCOUNT: 61270**

Summary Account

**FINANCIAL STATEMENT:** Income Statement - Expense

**DEFINITION:**

These accounts do not apply when reserve accounts under a WCF (Working
Capital Fund) have been established by the agency (see Reserve Expense
Accounts 69512 -- 69526 and Reserve Liability Accounts 21500 - 215400).

The costs that should be recorded here are all costs associated with the
refurbishment of an aircraft, including repaint, avionics upgrades,
reupholstery or other refurbishment of the interior, etc. This account
should not be used to record routine, minor paint touch-up or interior
cleaning and repairs.

These costs can be incurred with a commercial vendor (account number
61272) or another federal agency (account number 61274).

**SOURCE:** - Vendor invoices

**COMMENTS:**

When management analyzes the costs in this account, it is important to
take into account the fact that aircraft refurbishment expenses for an
aircraft are incurred only infrequently (for example only every 5 to 10
years for a typical operation). As a result, when calculating the true
cost of operation, it is important to spread the costs incurred in this
account over the total hours or years between refurbishments.

Recording this transaction is accomplished as follows:

**Debit Variable Maintenance Costs -- Aircraft Refurbishment Expense**
**(Commercial) or (Federal)** (Expense Account 61272 or 61274)

**Credi**t Accounts Payable (Liability Account 21100)

When the invoice for this refurbishment is paid,

**Debit** Accounts Payable (Liability Account 21100)

**Credit** Cash (Asset Account 10100)

**A-126:** Engine Overhaul, Refurbishment, Major Component Repair

**A-76:** 5d

**FAIRS:** 91, 92

**OBJECT CLASS:** 11.XX, 12.XX, 25.XX or 26.XX

**ITEM: Major Component Rebuild and Overhaul Expense ACCOUNT: 61280**

Summary Account

**FINANCIAL STATEMENT:** Income Statement - Expense

**DEFINITION:**

These accounts do not apply when reserve accounts under a WCF (Working
Capital Fund) have been established by the agency (see Reserve Expense
Accounts 69512 -- 69526 and Reserve Liability Accounts 21500 - 215400).

The costs that should be recorded here are all costs associated with the
rebuild and/or overhaul of major components (such as transmissions,
propellers, landing gears, rotor hubs, servo controls, hydraulic pumps,
etc.). This applies to both components that have definite time
limitation after which overhaul is required as well as major components
that are "on condition" and can be rebuilt. In addition, the repair cost
associated with premature component removal and overhaul should be
recorded here. This account should not be used to record routine, minor
maintenance expenses for the systems and components.

These costs can be incurred with a commercial vendor (account number
61282) or another federal agency (account number 61284).

**SOURCE:** - Vendor invoices

**COMMENTS:**

When management analyzes the costs in this account, it is important to
take into account the fact that component overhaul and rebuild expenses
for an aircraft are incurred only infrequently. As a result, when
calculating the true cost of operation, it is important to spread the
costs incurred in this account over the total hours or years between
overhaul or rebuild.

Recording this transaction is accomplished as follows:

**Debit Variable Maintenance Costs -- Major Component Overhaul and
Rebuild Expense** **(Commercial) or (Federal)** (Expense Account 61282
or 61284)

**Credi**t Accounts Payable (Liability Account 21100)

When the invoice for this work is paid,

**Debit** Accounts Payable (Liability Account 21100)

**Credit** Cash (Asset Account 10100)

**A-126:** Engine Overhaul, Refurbishment, Major Component Repair

**A-76:** 5d

**FAIRS:** 93, 94

**OBJECT CLASS:** 11.XX, 12.XX, 25.XX or 26.XX

**ITEM: Life Limited Item Expense ACCOUNT: 61290**

Summary Account

**FINANCIAL STATEMENT:** Income Statement - Expense

**DEFINITION:**

These accounts do not apply when reserve accounts under a WCF (Working
Capital Fund) have been established by the agency (see Reserve Expense
Accounts 69512 -- 69526 and Reserve Liability Accounts 21500 - 215400).

The costs that should be recorded here are all costs associated with the
replacement of life limited components (such as rotor blades, flap
tracks, etc.). This account should not be used to record routine, minor
maintenance expenses for the systems and components.

These costs can be incurred with a commercial vendor (account number
61292) or another federal agency (account number 61294).

**SOURCE:** - Vendor invoices

**COMMENTS:**

When management analyzes the costs in this account, it is important to
take into account the fact that component replacement expenses for an
aircraft are incurred only infrequently. As a result, when calculating
the true cost of operation, it is important to spread the costs incurred
in this account over the total hours or years between replacements.

Recording this transaction is accomplished as follows:

**Debit Variable Maintenance Costs -- Life Limited Item Expense**
**(Commercial) or (Federal)** (Expense Account 61292 or 61294)

**Credi**t Accounts Payable (Liability Account 21100)

When the invoice for this item is paid,

**Debit** Accounts Payable (Liability Account 21100)

**Credit** Cash (Asset Account 10100)

**A-126:** Engine Overhaul, Refurbishment, Major Component Repair

**A-76:** 5d

**FAIRS:** 93, 94

**OBJECT CLASS:** 11.XX, 12.XX, 25.XX or 26.XX

**ITEM: Fixed Maintenance Costs ACCOUNT: 61300**

Summary Account

**FINANCIAL STATEMENT:** Income Statement - Expense

**DEFINITION:**

Fixed maintenance costs include maintenance and inspection activities
that occur based on a calendar interval rather than a flight-hour
interval. This can include both major calendar-based inspections and the
cost of maintenance personnel employed regardless of the exact number of
hours flown. For more detailed breakdown of expenses refer to 61312
through 61353. Cost does **not** vary depending upon the usage of the
aircraft

**SOURCE:** The sources of information are identical to the sources for
variable maintenance costs.

**COMMENTS:**

**A-126:** See Accounts 61310 -- 61353

**A-76:** See Accounts 61310 \-- 61353

**FAIRS:** See Accounts 61310 \-- 61353

**OBJECT CLASS:** See Accounts 61310 \-- 61353.

**ITEM: Fixed Maintenance Costs - Labor ACCOUNT: 61310**

Summary Account

**FINANCIAL STATEMENT:** Income Statement - Expense

DEFINITION:

**Fixed Maintenance Costs -- Labor includes** all labor expended by
mechanics and inspectors associated with maintenance scheduled on a
calendar basis paid to a Federal source. Report maintenance labor costs
which are severable from other costs or which result from agreements
where another Federal Executive agency provides only labor and your
Federal Executive agency provides parts.

Examples of costs associated with the above maintenance personnel are
salaries, benefits, training, travel, etc. For a more detailed breakdown
of expenses, refer to 61312 through 61317. Costs **not** included in the
account are the labor costs associated with engine or component
overhauls (accounts 61260 and 61280 or 21500 and 21510), refurbishment
(account 61270 or 21505), and other major maintenance for which
Government agencies have established reserve accounts (account 61290 or
21515). Labor costs associated with maintenance contracts also are
**not** included in this account. (See account 61350 for costs
associated with fixed expense maintenance contracts.)

**SOURCE:** Work orders, timecards, payroll journal, vendor invoices for
travel and training

**COMMENTS:**

Depending upon the size of the organization, Government agencies can
expand account 61310. They can do so as illustrated in the Chart of
Accounts in Section 4.2.1, by developing sub accounts that collect labor
by wages, benefits, training, etc. and provide a breakout by whether the
service is performed by a federal or a commercial organization. If the
agency requires more detail for internal reporting requirements, they
could break down the costs further into unscheduled, scheduled, engines
and avionics as portrayed in the sample chart of accounts referenced
above.

If the expense is salaries and benefits it should be recorded as
follows:

**Debit** Maintenance Labor/Maint. Wages and Benefits (Expense Account
61312 or 61313)

**Credit** Accrued Liabilities/Payroll and Benefits (Liability Account
22100)

When the salaries are paid, debit the accrued liabilities account and
credit the cash account

If the expense is training costs, proceed as follows:

**Debit** Maintenance Labor/Training (Expense Account 61314 or 61315)

**Credit** Accounts Payable (Liability Account 21100)

**A-126:** Maintenance Labor - Fixed

**A-76:** 10a

**FAIRS:** 77, 78

**OBJECT CLASS:** Salaries - 11.1X

Benefits - 12.1X

Training - 25.XX

**ITEM: Fixed Maintenance Costs - Parts Account: 61320, 61330, 61340**

Summary Account

**FINANCIAL STATEMENT:** Income Statement - Expense

**DEFINITION:**

Fixed maintenance parts include the cost of materials and parts consumed
during maintenance and inspections that are performed on a calendar
basis. For detailed posting accounts refer to 61321 and 61323 (parts -
airframe), 61331 and 61333 (parts -- avionics) and 61341 and 61343
(parts -- engine) as appropriate. The account does **not** include the
costs associated with engine and component overhauls, refurbishment, and
other major maintenance for which Government agencies have established
reserve accounts. Part costs associated with maintenance contracts also
are **not** included in this account. (See account 61350 for costs
associated with maintenance contracts.) Examples of costs recorded in
this category are bearings, packings, filters, gears, consumable, etc.
Parts may come from vendors or from the agency\'s inventory.

**SOURCE:** Work orders, vendor invoices, inventory/parts room issue

**COMMENTS:**

The suggested chart of accounts in Section 4.2.1 illustrates an approach
for establishing sub accounts by collecting costs according to scheduled
and unscheduled parts for airframe, avionics, and engines. It is
important to remember, identify the output requirements, then develop a
system that satisfies the requirements. A final issue to consider
involves materiality. Do not track costs to such a degree that the cost
of tracking exceeds the benefits of knowledge gained. Some material such
as rags, paint remover, and other shop supplies are more wisely
classified as overhead. Recording this transaction in the case of "parts
-- airframe" is accomplished as follows for a retail purchase:

**Debit Fixed Maintenance Costs -- Parts Airframe** (Expense Account
61321 or 61323)

**Credi**t Accounts Payable (Liability Account 21100)

When the invoice for this part is paid,

**Debit** Accounts Payable (Liability Account 21100)

**Credit** Cash (Asset Account 10100)

If the part was obtained from the agency\'s parts inventory, proceed as
follows:

**Debit** Fixed **Maintenance Costs -- Parts Airframe** (Expense Account
61321 or 61323)

**Credit** Inventory for Agency Operations/Parts (Asset Account 15120)

To record the purchase of parts for the agency\'s parts inventory,
record it as follows:

**Debit** Inventory for Agency Operations/Parts (Asset Account 15120)

**Credit** Accounts Payable (Liability Account 21100)

To record these transactions for "parts -- avionics" and "parts --
engine", use the same approach substituting the appropriate account
numbers for 61321 and 61323.

**A-126:** Maintenance Parts - Fixed

**A76:** 10b

**FAIRS:** 79, 80

**OBJECT CLASS:** Parts - 26.XX

**ITEM: Fixed Maintenance Costs - Contracts ACCOUNT: 61350**

Summary Account

**FINANCIAL STATEMENT:** Income Statement - Expense

**DEFINITION:**

Fixed contract costs include all costs associated with the periodic
calendar-based maintenance of the aircraft that are performed by an
outside entity, as well as any maintenance contract costs that must be
paid regardless of the amount of hours flown. Do not include any outside
maintenance that is defined as Variable Maintenance Costs, see accounts
61200 through 61250. Fixed contact costs are similar to fixed
maintenance labor and part categories except contract costs are
external, either with a commercial entity or another federal agency. The
expenses may be incurred with commercial vendors (account number 61351)
or another federal agency (account number 61353)

**SOURCE:** Vendor invoices

**COMMENTS:**

In some cases, Governmental agencies will not have enough aircraft or
activity or expertise to justify an in-house maintenance department. As
a result, they will establish contracts with outside maintenance
entities to perform the maintenance on its aircraft. If this contract
includes a fixed fee regardless of the amount of flight activity it
should be classified as a fixed cost. Also, agencies with maintenance
departments will occasionally require work from outside entities for
specialized work or heavy maintenance. If this work is required as a
result of a calendar limit, the work can be classified as a fixed cost.
If a contractor does all maintenance work, an agency will want to expand
this cost account to provide more detail with respect to scheduled and
unscheduled work, etc. Vendors will normally supply this information if
requested.

Recording this transaction is accomplished as follows:

**Debit Fixed Maintenance Costs - Contracts** **(Commercial) or
(Federal)** (Expense Account 61351 or 61353)

**Credi**t Accounts Payable (Liability Account 21100)

When the invoice for this contract is paid,

**Debit** Accounts Payable (Liability Account 21100)

**Credit** Cash (Asset Account 10100)

**A-126:** Maintenance Contracts - Fixed

**A76:** 10c, 19c

**FAIRS:** 81, 82, 106, 107

**OBJECT CLASS:** 25.XX

**ITEM: Depreciation Expense ACCOUNT: 61400**

Summary Account

**FINANCIAL STATEMENT:** Income Statement - Expense

**DEFINITION:**

Depreciation enables an entity to recognize the loss in value of assets
over a period of time. In essence, an asset is \"consumed\" over its
useful economic life. To enable a better understanding of the full cost
of operation, an agency must compute and record depreciation on a
periodic basis. Recording depreciation is an accounting entry only and
does not involve the outlay of actual cash, as is the case with most
other operating costs. For detailed posting information please refer to
61410 through 61460. To compute depreciation, refer to **"COMMENTS"**
below.

**SOURCE:**

For a Governmental agency to compute depreciation expense, they must
know the following: 1) **acquisition cost**. If the acquisition cost is
not known, then use other industry resources that establish a market
value must be used. 2) Estimate the **useful life** of the asset or the
length of time the asset will be used. 3) Estimate the **residual
value** of the asset at the end of its useful life. The FAIRS program
contains a residual value table to help estimate asset residual value
for these calculations. Circular A-76 suggests agencies consult the
following sources when establishing residual value, GSA, [Aircraft
Bluebook Price Digest]{.underline} or the [Official Helicopter Blue
Book.]{.underline}

**COMMENTS:**

Government agencies can calculate the straight line depreciation expense
for a given period by subtracting the residual value from the
acquisition cost and dividing the difference by the useful life. Changes
in estimated useful life, estimated residual value, and capital
improvements will affect the amount of depreciation recognized in
current and future periods. Land is **not** a depreciable asset.

This expense is recorded as follows:

**Debit** Depreciation Expense (Expense Account 61410 for aircraft;
61420 for buildings; 61430 for other structures and facilities, 61440
for equipment and 61460 for assets on capital leases)

**Credit** Accumulated Depreciation (Asset Account 17390 for buildings;
17490 for other structures and facilities; 17590 for aircraft and other
equipment and 18190 for assets under capital lease

**A-126:** Depreciation

**A-76:** 12

**FAIRS:** Not applicable

**OBJECT CLASS:** Not applicable

**ITEM: Operations Overhead ACCOUNT: 61500**

Summary Account

**FINANCIAL STATEMENT:** Income Statement - Expense

**DEFINITION:**

Operations overhead are costs that are directly associated with the
management and support of the Government agency\'s aircraft or aviation
program and not accounted for elsewhere. Examples include personnel
costs (salaries, benefits, travel, uniform allowances, training, etc.)
for management and administrative personnel directly responsible for the
aircraft program; building and ground maintenance; janitorial services;
lease or rental fees for hangars, administrative buildings, and office
space; computers, communications and utility costs; office supplies and
equipment; tie-down fees for aircraft located on base; maintenance of
support equipment; etc..

For detailed posting information, refer to accounts 61510 through 61580,
as follows:

61510 Personnel cost -- Admin and management

61520 Building and ground maintenance

61530 Janitorial service

61540 Hangar fees

61550 Tie down fees at base

61560 Shop equipment

61570 Shop parts

61580 Aircraft components

**SOURCE:** There are many sources for recording Operations Overhead.
These include but are not limited to: time cards, work orders, utility
invoices, rental agreements for hangars and other buildings, vendor
invoices for supplies, maintenance contract for building and grounds,
etc..

**COMMENTS:**

Government agencies should carefully determine what operations support
the aviation program, and then construct accounts that will capture cost
information to satisfy the reporting requirements. View the suggested
chart of accounts as an example only.

As discussed, these expenses can involve personnel salaries, parts and
services bought from outside vendors or parts obtained from inventory.
The exact category of expense will determine how these expenses are
recorded. If it involves salaries and benefits, it should be debited to
expense account 61510 and credited to liability account 22100. If it is
a part or service, it should be debited to expense account 61520 \--
61580 or 61600, as appropriate. It should also be credited to liability
account 21100 (accounts payable) or to asset account 15120 (inventory)
depending on whether it was bought from a vendor or acquired from
inventory.

**A-126:** Operations Overhead

**A-76:** 14,20

**FAIRS:** 65

**OBJECT CLASS:** 11.1X, 12.1X, 13.XX, 21.XX, 22.XX, 23.1X, 23.2X,
23.3X, 24.XX, 26.XX, 31.XX, 32.XX

**ITEM: Other Direct Costs ACCOUNT: 61600**

**Summary Account**

**FINANCIAL STATEMENT**: Income Statement - Expense

**DEFINITION:**

Operational and aviation program costs not classified elsewhere in this
Cost Accounting Guide. It includes any action that causes an outflow of
assets or incurrence of liabilities during the current operating period
resulting from rendering services, delivering or producing goods, or
carrying out other normal operating activities that has not been
identified in the 6XXXX series of accounts. Two posting account numbers
are available -- 61610 Other Direct Costs (Commercial) and 61620 Other
Direct Costs (Federal)

**SOURCE:** Purchase orders, vendor invoices, etc.

**COMMENTS:**

This account should have very little use, in that if an aviation
activity has identified a cost category that has not been addressed,
they should establish an account for that cost in the appropriate place
in the Chart of Accounts. If an organization does use this account on a
rare occasion, then the costs posted here should be accumulated with the
other Operations Overhead accounts in the 615XX series.

Normally, these expenses involve parts and services bought from outside
vendors. To record this expense, it should be debited to expense account
61610 (Commercial) or 61620 (Federal). Then, it should be credited to
liability account 21100 (accounts payable).

**A-126:** Operations Overhead

**A-76:** 14, 21

**FAIRS:** 66, 67

**OBJECT CLASS:** All the same classes as account 61500.

**ITEM: Interest Expense ACCOUNT: 63000**

Summary Account

**FINANCIAL STATEMENT:**

**DEFINITION:**

This account has two sub accounts. One is for the cost of borrowing from
a commercial lender. The other is for the cost of using federal funds
for the acquisition of an aircraft.

Circulars A-76 and A-126 both require use of interest expense in their
calculations of total ownership costs. Both define interest expense as
the cost to the government for acquiring the funds necessary for capital
investments. Normally, government agencies should use the borrowing rate
announced by the Department of Treasury for bonds or notes whose
maturities correspond to the useful life of the asset. This results in a
"paper" transaction to establish the interest expense required by A 76
and A 126. This interest expense is recorded in account 63100.

If an agency using a capital lease or a lease-to-purchase to acquire an
aircraft from a commercial lender, the interest that must be paid on a
periodic basis is recorded in account 63200

**SOURCE:** - Lender invoice or

\- Aircraft acquisition price, Documentation of bond or note rates on
debt from government

**COMMENTS:**

With a commercial lease, the interest portion of each lease payment will
be clearly stated on the periodic invoice from the lender. This interest
must be recorded here and included in the official accounting system.

For agencies that only "borrow" from the US Treasury, [interest expense
will not be included in the official accounting system,]{.underline}
however interest expense must be considered when conducting cost
comparison studies.

To calculate the interest expense multiply the acquisition price of the
aircraft plus any capital improvements by the estimated Department of
the Treasury borrowing rate on the date the agency anticipates acquiring
the aircraft. If the acquisition price is unknown, determine the market
value by using the [Aircraft Bluebook Price Digest]{.underline} or the
[Official Helicopter Blue Book]{.underline}. Agencies should estimate
the value of military specification aircraft based upon comparable
civilian aircraft.

**A-126:** Cost of Capital

**A-76:** Not applicable

**FAIRS:** Not applicable

**OBJECT CLASS:** Not applicable

**ITEM: Administrative Overhead ACCOUNT: 66000**

Summary Account

**FINANCIAL STATEMENT:** Income Statement - Expense

**DEFINITION:**

Administrative Overhead costs involve indirect costs that do not relate
directly to the aviation program, but are necessary for the overall
performance of the program. Administrative Overhead includes the
pro-rated share of salaries, office supplies, and other expenses of
fiscal, accounting, personnel, management, and similar common services
performed outside, but in support of the aviation program. This cost
element is also often referred to as General and Administrative costs
(G&A). Actual posting is accomplished in account 66010.

For cost comparison purposes, government agencies should compute the
actual administrative costs that they could avoid if the agency
contracted out the aviation program.

**SOURCE:** The sources for recording Administrative Overhead are
similar to Operations Overhead and would include time cards, work
orders, utility invoices, rental agreements, vendor invoices for
supplies, maintenance contract for building and grounds, etc. See
Section 2.5.4 for a further discussion on calculating this cost element.

**COMMENTS:**

Many of the costs in administrative overhead will be similar to
operations overhead; however, administrative overhead is not directly
associated with the operation of any particular aviation program.
Therefore, a governmental agency must decide the best basis for
assigning the indirect costs. Possible bases for allocation are flight
activity of programs, number of aircraft in programs, and number of
employees in each program. Allocation methods are discussed Section
2.5.5.

This cost is recorded as follows:

**Debit** Indirect Administrative Costs (Expense Account 66010)

**Credit** Accrued Liabilities/Other (Liability Account 21100)

Accured Liabilities Payroll (Liability Account 22100)

**A-126:** Administrative Overhead

**A-76:** 15

**FAIRS:** 8

**OBJECT CLASS:** 11.1X, 12.1X, 13.XX, 21.XX, 22.XX, 23.1X, 23.2X,
23.3X, 24.XX, 25.XX, 26.XX, 31.XX, 32.XX

**ITEM: Other Expenses ACCOUNT: 68000**

Posting Account

**FINANCIAL STATEMENT:** Income Statement - Expense

**DEFINITION:**

Any aviation activity expense that does not fit into the expense
categories described elsewhere in accounts 61000 through 66000 and 69000

**SOURCE:** - Vendor invoices

**COMMENTS:**

This account should have very little use, in that if an aviation
activity has identified a cost category that has not been addressed,
they should establish an account for that cost in the appropriate place
in the Chart of Accounts. If an organization does use this account on a
rare occasion, then the costs posted here should be accumulated with the
other Operations Overhead accounts in the 615XX series.

Normally, these expenses involve parts and services bought from outside
vendors. To record this expense, it should be debited to expense account
61610 (Commercial) or 61620 (Federal). Then, it should be credited to
liability account 21100 (accounts payable).

**A-126:** Operations Overhead

**A-76:** 14, 21

**FAIRS:** 66, 67

**OBJECT CLASS:** All the same classes as account 61500.

**ITEM: WCF/Reserve Expenses ACCOUNT: 69000**

Summary Account

**FINANCIAL STATEMENT:** Income Statement - Expense

**DEFINITION:**

These accounts apply only when reserve accounts under a WCF (Working
Capital Fund) have been established by the agency (see Expense Accounts
61260 - 61290 when the agency does not use reserve accounts under a
WCF).

**SOURCE:** This is a summary account. Posting accounts are 69011 -
69526

**COMMENTS:**

The two major expense categories that have been included in this account
are the cost of self insurance and reserve contributions for agencies
that have established a Working Capital Fund.

**A-126:** Not applicable

**A-76:** Not applicable

**FAIRS:** Not applicable

**OBJECT CLASS:** Not applicable

**ITEM: Self-Insurance ACCOUNT: 69010**

Summary Account

**FINANCIAL STATEMENT:** Income Statement - Expense

**DEFINITION:**

These accounts apply only when reserve accounts under a WCF (Working
Capital Fund) have been established by the agency.

Aviation activity involves risks and potential casualty losses and
liability claims. Unlike the private industry, the Government is
self-insuring by way of the Treasury\'s General Fund that covers
casualty losses and liability claims from accidents. For detailed
posting information, use the follwing accounts:

69011 Hull insurance

69012\. Liability insurance

The GSA publishes all applicable insurance rates needed to compute
self-insurance costs.

**SOURCE:** Aircraft market value as obtained from the [Aircraft
Bluebook Price Digest]{.underline}

Self-insurance rates are published by the GSA.

**COMMENTS:**

For aviation programs using Working Capital Funds (WCF) hull insurance
expenses are recognized as actual expenditures and therefore are part of
the official accounting system. Agencies with WCFs should establish a
hull Insurance Reserve account and a corresponding expense account.
Rates are established based on historical expenditures and/or estimates
of future costs any or all of which may be refined thereafter. For
agencies without WCF, the hull-insurance expense will not be included in
the official accounting system, however self-insurance expense must be
considered when conducting cost comparison studies.

For all agencies, liability insurance expense will be a calculation that
should be included in cost comparison studies. The liability insurance
expense will not be included in agencies\' accounting systems.

The cost of self insurance is recorded as follows:

**Debit** Self Insurance account (Expense Account 69011 or 69012)

**Credit** Self Insurance Reserve Account (Liability Account 29200)

Should an accident occur, the associated costs should be recorded as
follows:

**Debit** Self Insurance Reserve Account (Liability Account 29200)

**Credit** Cash Account (Asset Account 10100)

**A-126:** Self Insurance Cost

**A-76:** 13

**FAIRS:** 52

**OBJECT CLASS:** Not applicable

**ITEM: Reserve Contribution Expense ACCOUNT: 69500**

Summary Account

**FINANCIAL STATEMENT**: Income Statement - Expense

**DEFINITION:**

The accounts in the 695XX series are only available to aviation
activities that have been able to establish a Working Capital Fund (WCF)
to handle the aviation accounting. This is the summary account, the
actual activity will be in accounts 69512, 69514, 69516, 69522, and
69526.

**SOURCE:** Aircraft use/activity reports.

**COMMENTS:**

The accounts in this series are established to provide for engine
overhaul, major component rebuild, refurbishment, and life limited
retirement items through a reserve account process. As an aircraft is
being used, an expense is generated to one or more of these accounts
with the offsetting contra entry going to the reserve accounts in the
215XX series, thereby creating a balance in the appropriate reserve
account to be available when the engine overhaul, component rebuild,
etc. needs to occur.

**A-126:** Not applicable

**A-76:** Not applicable

**FAIRS:** Not applicable

**OBJECT CLASS:** Not applicable to these accounts. However, if the
finance system in use in your agency requires an object class for any
item booked as an expense, then please review the object class
discussion account 17390.

**ITEM: Variable Expense Reserves ACCOUNT: 69510**

Summary Account

**FINANCIAL STATEMENT**: Income Statement - Expense

**DEFINITION:**

The reserve items that have industry established life limits that are
based on hours flown or cycles (such as starts or landings) are included
in the 6951X series accounts. See accounts 69512, 69514, and 69516 for
further definition and posting entries.

These accounts apply only when reserve accounts under a WCF (Working
Capital Fund) have been established by the agency (see Expense Accounts
61260 - 61290 when the agency does not use reserve accounts under a
WCF).

**SOURCE:**

**COMMENTS:**

As aircraft activity (hours flown) is recorded into the system, the
aircraft use report causes two very distinct things to occur; (1) the
revenue is generated and a bill is issued to the user, and (2) the
reserve factor for each aircraft for each appropriate reserve category
generates an expense to one or more of these reserve expense accounts
and the offsetting credit entry to the contra account in 21510 - 21540.

**A-126:** Not applicable

**A-76:** Not applicable

**FAIRS:** Not applicable

**OBJECT CLASS:** Not applicable to these accounts. However, if the
finance system in use in your agency requires an object class for any
item booked as an expense, then please review the object class
discussion account 17390.

**ITEM: Engine Overhaul Reserve Expense ACCOUNT: 69512**

**FINANCIAL STATEMENT**: Income Statement - Expense

**DEFINITION:**

These accounts apply when reserve accounts under a WCF (Working Capital
Fund) have been established by the agency (see Expense Accounts 61260 -
61290 when the agency does not use reserve accounts under a WCF).

The expense that is charged to this account is the projected per hour
cost of engine overhaul at its appropriate future date. The estimated
remove, overhaul, and replace costs are divided by the expected life of
the component in hours flown. Then for every hour this aircraft flies a
cost is charged against this account.

Accounting for cost in this category is different from the other expense
categories. Normally, organizations collect total expenditures in a
particular cost account for the period under consideration. Then, if
they wish to know cost per flying hour, they divide this cost by the
number of hours flown during the period. Because engine overhauls occur
so infrequently, engine overhaul reserve expense for a given period is
obtained by estimating the future cost to overhaul/rebuild/repair the
engine and dividing this by the total number of hours flown between
overhaul periods. Include in the estimate the cost of parts and labor.
Labor hours would include removal, replacement, and
overhaul/rebuild/major repair. For those agencies that can establish
reserve accounts, each and every flying hour recorded should cause an
expense to 69512 and an offsetting credit to account 21510. By
recognizing expenses before they are encountered, a reserve is
established.

**SOURCE: -** Aircraft use/activity reports.

\- Internal sources from prior experience

\- Manufacturers\' estimates of component overhaul, other outside
sources, hours flown for the period

\- Databases available from outside vendors

**COMMENTS:**

Due to the timing and amount, a cost-per-flying-hour would be misleading
if overhaul expenses were accounted for only in the period in which
encountered. To get a more accurate cost-per-flying-hour, agencies
should recognize a portion of the expense in each period that receives
the benefit. The overhaul costs established in this way, are posted to
the engine overhaul reserve account \-- account number 21510 if the
aircraft program is able to establish reserves.

This expense is an operating cost of the aircraft in the same accounting
cycle as the revenue is generated, much the same way that the fuel and
scheduled maintenance are, thereby having the total cost of producing
the service reflected in the same accounting period as the revenue. This
levels the costs of operation over the total life without the occasional
large peaks in the annual costs of a particular aircraft because of an
engine overhaul.

As hours flown are recorded the entries generated in the system are:

> **Debit** this account for the amount (the number of hours times the
> established per hour engine reserve set-aside)
>
> **Credit** account 21510

**A-126:** Engine Overhaul, Refurbishment, Major Component Repair

**A-76:** 5d,e

**FAIRS:** 85, 86

**OBJECT CLASS:** Not applicable to these accounts. However, if the
finance system in use in your agency requires an object class for any
item booked as an expense, then please review the object class
discussion on account 17390.

**ITEM: Major Component Rebuild and Overhaul Reserve Expense ACCOUNT:
69514**

**FINANCIAL STATEMENT**: Income Statement - Expense

**DEFINITION:**

These accounts apply when reserve accounts under a WCF (Working Capital
Fund) have been established by the agency (see Expense Accounts 61260 -
61290 when the agency does not use reserve accounts under a WCF).

The expense that is charged to this account is the projected per hour
cost of a major component rebuild or overhaul at its appropriate future
date. The estimated remove, overhaul, and replace costs are divided by
the expected life of the component in hours flown. Then for every hour
this aircraft flies a cost is created against this account.

Accounting for cost in this category is different from the other expense
categories. Normally, organizations collect total expenditures in a
particular cost account for the period under consideration. Then, if
they wish to know cost per flying hour, they divide this cost by the
number of hours flown during the period. Because component overhauls
sometimes occur infrequently, component overhaul expense for a given
period is obtained by estimating the future cost to overhaul/rebuild the
relevant components, dividing this by the total number of hours flown
between overhaul periods for each component, and then multiplying the
resulting cost per flying hour by the hours flown for the given period.
Include in the estimate the cost of parts and labor. Labor hours would
include removal, replacement, and overhaul/rebuild/major component.

**SOURCE: -** Aircraft use/activity reports.

\- Internal sources from prior experience,

\- Manufacturers\' estimates of component overhaul, other outside
sources, hours flown for the period

\- Databases from outside vendors

**COMMENTS:**

Due to the timing and amount, a cost-per-flying-hour would be misleading
if overhaul expenses were accounted for only in the period in which
encountered. To get a more accurate cost-per-flying-hour, agencies
should recognize a portion of the expense in each period that receives
the benefit. The overhaul costs established in this way, are posted to
the component overhaul reserve account \-- account number 21530 if the
aircraft program is able to establish reserves.

This expense is an operating cost of the aircraft in the same accounting
cycle as the revenue is generated, much the same way that the fuel and
scheduled maintenance is, thereby having the total cost of producing the
service reflected. This levels the costs of operation over the total
life without the occasional large peaks in the annual costs of a
particular aircraft because of a component rebuild or overhaul.

As hours flown are recorded the entries generated in the system are:

> **Debit** this account for the amount (the number of hours flown times
> the pre-established per hour rate for major component rebuilds)
>
> **Credit** account 21530

**A-126:** Engine Overhaul, Refurbishment, Major Component Repair

**A-76:** 5d,e

**FAIRS:** 93, 94

**OBJECT CLASS:** Not applicable to these accounts. However, if the
finance system in use in your agency requires an object class for any
item booked as an expense, then please review the object class
discussion account 17390.

**ITEM: Life Limited Item Reserve Variable Expense ACCOUNT: 69516**

**FINANCIAL STATEMENT**: Income Statement - Expense

**DEFINITION:**

These accounts apply when reserve accounts under a WCF (Working Capital
Fund) have been established by the agency (see Expense Accounts 61260 -
61290 when the agency does not use reserve accounts under a WCF).

This account is to establish a reserve account for those items on the
aircraft that have a stated life limit in numbers of hours flown or
cycles of operation that do not fit in either account 69512 or 69514.
The expense that is charged to this account is the projected per hour
cost of the retirement item at its appropriate future date. The
estimated remove and replace costs are divided by the expected life of
the retirement item in flight hours. Then for every hour this aircraft
flies a cost is created against this account.

Accounting for cost in this category is different from the other expense
categories. Normally, Government agencies compute cost-per-flight-hour
by dividing total expenditures for the period by the number of hours
flown during the period. For life limited item expenses, Government
agencies should estimate the future cost to replace life limited items,
divide by the total retirement life in hours flown. For those agencies,
that can establish reserve accounts, each and every hour recorded should
cause an expense to 69516 or 69526 and an offsetting credit to 21540. In
essence, this recognizes expenses before they are encountered by setting
a reserve.

**SOURCE: -** Aircraft use/activity reports.

\- Manufacturers\' price list

\- Other outside sources and databases

**COMMENTS:**

Due to the timing and amount, a cost-per-flying-hour would be misleading
if life limited item expenses were accounted for only in the period in
which they were encountered. To get a more accurate
cost-per-flying-hour, agencies should recognize a portion of the expense
in each period that receives the benefit. The retirement item costs
established in this way, are posted to the component overhaul reserve
account \-- account number 21540, if the aircraft program is able to
establish reserves.

This expense is an operating cost of the aircraft in the same accounting
cycle as the revenue is generated, much the same way that the fuel and
scheduled maintenance is, thereby having the total cost of producing the
service reflected. This levels the costs of operation over the total
life without the occasional large peaks in the annual costs of a
particular aircraft because of a retirement item replacement.

> **Debit** this account for the per hour pre-established cost it is
> estimated will be needed to cover the retirement items, times the
> hours of flight time
>
> **Credit** account 21540

**A-126:** Engine Overhaul, Refurbishment, Major Component Repair

**A-76:** 5d

**FAIRS:** 93, 94

**OBJECT CLASS:** Not applicable to these accounts. However, if the
finance system in use in your agency requires an object class for any
item booked as an expense, then please review the object class
discussion account 17390.

**ITEM: Fixed Expense Reserves ACCOUNT: 69520**

Summary Account

**FINANCIAL STATEMENT**: Income Statement - Expense

**DEFINITION:**

These accounts apply when reserve accounts under a WCF (Working Capital
Fund) have been established by the agency (see Expense Accounts 61260 -
61290 when the agency does not use reserve accounts under a WCF).

The two reserve accounts (69522 and 69526) that follow this summary
account are for expensing the reserve accounts that are set up for items
that have their life stated or controlled in days, months, or years.
That is they have a finite life that is driven by the calendar rather
than hours flown.

**SOURCE:**

**COMMENTS:**

The expenses posted to these next two accounts differ from the ones
included in the 695XX series in that the items in those accounts have
their life limits stated in numbers of hours flown or cycles of
operation. The items that affect accounts 69522 and 69526 have their
limits based on the passage of time (days, months, or years).

**A-126:** Not applicable

**A-76:** Not applicable

**FAIRS:** Not applicable

**OBJECT CLASS:** Not applicable to these accounts. However, if the
finance system in use in your agency requires an object class for any
item booked as an expense, then please review the object class
discussion account 17390.

**ITEM: Aircraft Refurbishment Reserve Expense ACCOUNT: 69522**

**FINANCIAL STATEMENT**: Income Statement - Expense

**DEFINITION:**

These accounts apply when reserve accounts under a WCF (Working Capital
Fund) have been established by the agency (see Expense Accounts 61260 -
61290 when the agency does not use reserve accounts under a WCF).

Accounting for cost in this category is different from the other expense
categories. Normally, organizations collect total expenditures in a
particular cost account for the period under consideration. Then, if
they wish to know cost per flying hour, they divide this cost by the
number of hours flown during the period. Because aircraft refurbishments
occur so infrequently, refurbishment expense for a given period is
obtained by estimating the future cost to refurbish the aircraft,
dividing this by the total number of years of operation between
refurbishment periods, and then dividing the resulting cost per flying
hour by the hours flown for the given period. Include in the estimate
the cost of all parts and labor.

Aircraft refurbishment is a expense that should be anticipated if the
aviation activity plans on having the aircraft in operation for more
than ten years or so. Refurbishment can include such items as; new
interior upholstery, a repaint of the exterior, new state-of-the-art
avionics, etc. Refurbishment does not include the engines or other major
components that are addressed by the other accounts in this 695XX
series.

**SOURCE: -** Aircraft activity reports and/or aircraft monthly
assignment agreements.

\- Manufacturers\' estimates of refurbishment costs, - Other outside
sources,

\- Hours flown for the period

\- Months of service assigned and/or provided

**COMMENTS:**

Due to the timing and amount, a cost-per-flying-hour would be misleading
if refurbishment expenses were accounted for only in the period in which
encountered. To get a more accurate cost-per-flying-hour, agencies
should recognize a portion of the expense in each period that receives
the benefit. The refurbishment costs established in this way, are posted
to the aircraft refurbishment reserve account \-- account number 21520
if the aircraft program is able to establish reserves.

For each month of assignment to a dedicated user a charge should be
made, whether the aircraft had any flight activity or not. This monthly
charge is to cover the various expense items that are of a fixed cost
nature (see accounts 61300 through 61600). This same monthly charge rate
to the assigned user will cover the reserve expense for refurbishment.

For each month of assignment:

> **Debit** this account with the established monthly refurbishment
> reserve set-aside
>
> **Credit** account 21520

**A-126:** Engine Overhaul, Refurbishment, Major Component Repair

**A-76:** 5d

**FAIRS:** 91,92

**OBJECT CLASS:** Not applicable to these accounts. However, if the
finance system in use in your agency requires an object class for any
item booked as an expense, then please review the object class
discussion account 17390.

**ITEM: Life Limited Item Reserve Fixed Expense ACCOUNT: 69526**

**FINANCIAL STATEMENT**: Income Statement - Expense

**DEFINITION:**

These accounts apply when reserve accounts under a WCF (Working Capital
Fund) have been established by the agency (see Expense Accounts 61260 -
61290 when the agency does not use reserve accounts under a WCF).

This account should be charged with the expense side of any reserve
set-aside that must occur based on calendar days and/or months, other
than those items covered by account 69522.

This account is to establish a reserve account for those items on the
aircraft that have a stated life limit expressed in months or years that
do not fit in either account 69512 or 69514. The expense that is charged
to this account is the projected per hour cost of the retirement item at
its appropriate future date. The estimated remove and replace costs are
divided by the expected life of the retirement item in flight hours.
Then for every hour this aircraft flies a cost is created against this
account.

Accounting for cost in this category is different from the other expense
categories. Normally, Government agencies compute cost-per-flight-hour
by dividing total expenditures for the period by the number of hours
flown during the period. For life limited item expenses, Government
agencies should estimate the future cost to replace life limited items,
divide by the estimated total retirement life in hours flown (based on
its calendar life and the anticipated future utilization). For those
agencies, that can establish reserve accounts, each and every hour
recorded should cause an expense to 69516 or 69526 and an offsetting
credit to 21540. In essence, this recognizes expenses before they are
encountered by setting a reserve.

**SOURCE: -** Aircraft activity reports and/or aircraft monthly
assignment agreements.

\- Manufacturers\' price list

\- Other outside sources and databases

\- Estimated hours flown for the calendar life of the component.

**COMMENTS:**

Due to the timing and amount, a cost-per-flying-hour would be misleading
if life limited item expenses were accounted for only in the period in
which they were encountered. To get a more accurate
cost-per-flying-hour, agencies should recognize a portion of the expense
in each period that receives the benefit. The retirement item costs
established in this way, are posted to the component overhaul reserve
account \-- account number 21540, if the aircraft program is able to
establish reserves.

Only items that have a replacement interval measured in calendar time
should be included in the reserve calculation for this account. Once the
group of items and the estimate costs are listed, then an estimate of
when in the future these outlays will occur must be made. The cost then
must be divided by the months of assignment in the period between this
listing date and the work to be done date; thereby establishing a
monthly rate for this reserve expense.

As each months assignment is recorded:

> **Debit** this account for the monthly rate
>
> **Credit** account 21540

**A-126:** Engine Overhaul, Refurbishment, Major Component Repair

**A-76:** 5e

**FAIRS:** 93, 94

**OBJECT CLASS:** Not applicable to these accounts. However, if the
finance system in use in your agency requires an object class for any
item booked as an expense, then please review the object class
discussion account 17390.

**ITEM: Gains ACCOUNT: 71000**

**Summary Account**

**FINANCIAL STATEMENT**: Income Statement - Extraordinary Items

**DEFINITION:**

Monetary gains that are acquired as a result of activities that are not
a normal part of the agency's aviation operation.

**SOURCE:** This is a summary account. Posting is done with accounts
71100 and 71900

**COMMENTS:**

> This account is used so that financial gains that are acquired as a
> result of out-of-the-ordinary activities are recorded as an
> appropriate increase in revenues without distorting the financial
> performance of the agency.

**A-126:** Not applicable

**A-76** Not applicable

**FAIRS:** Not applicable

**OBJECT CLASS:** No object class needed on these entries.

**ITEM: Gains on Disposition of Assets ACCOUNT: 71100**

**FINANCIAL STATEMENT**: Income Statement - Extraordinary Items

**DEFINITION:**

The gain on the disposition (such as sale, exchange, disposal or
retirement) of assets and personal property.

**SOURCE:** The sale document or other transaction notification.

**COMMENTS:**

When disposing of an aircraft or other capitalized asset (accounts 17300
through 17590) either through a sale or a trade-in; the asset value,
less the accumulated deprecation and the proceeds, equal the net gain or
loss on disposal. This account is credited with the net results when the
proceeds exceed the asset book value. The book value is determined by
subtracting the accumulated deprecation from the capitalized value of
the asset.

This type of gain is treated as an extraordinary gain so that it does
not distort the net income/loss from regular operations.

The posting for this transaction is as follows:

> **Debit** the accumulated depreciation account (most likely 17590) for
> the amount of depreciation that has been booked on this asset since
> its capitalization
>
> **Credit** the asset account for the full capitalized value of the
> asset (account 17510 for an aircraft)
>
> **Debit** the cash account (10100) for the amount the item brought in
> on the sale
>
> **Credit** this account with the amount needed to balance the above
> debits and credits

**A-126:** Not applicable

**A-76 22**

**FAIRS:** Not applicable

**OBJECT CLASS:** No object class needed on these entries.

**ITEM: Other Gains ACCOUNT: 71900**

**FINANCIAL STATEMENT**: Income Statement - Extraordinary Items

**DEFINITION:**

Any transaction that nets a gain in financial status for the aviation
activity, that does not come about through the normal operations or is
not the result of an asset disposition should be recorded to this
account.

**SOURCE:** Whatever financial document that verifies that the aviation
activity has received a net gain in the cash account (10100).

**COMMENTS:**

Any transaction that is not a normal business activity that causes a net
positive cash result would fit in this account.

The posting would be:

> **Debit** cash account (10100)
>
> **Credit** this account

**A-126:** Not applicable

**A-76:** Not applicable

**FAIRS:** Not applicable

**OBJECT CLASS:** No object class needed on these entries.

**ITEM: Losses ACCOUNT: 72000**

**Summary Account**

**FINANCIAL STATEMENT**: Income Statement - Extraordinary Items

**DEFINITION:**

Monetary losses that are incurred as a result of activities that are not
a normal part of the agency's aviation operation.

**SOURCE:** This is a summary account. Posting is done with accounts
71100 and 71900

**COMMENTS:**

> This account is used so that financial losses that are incurred as a
> result of out-of-the-ordinary activities are recorded as an
> appropriate increase in expenses without distorting the financial
> performance of the agency.

**A-126:** Not applicable

**A-76** Not applicable

**FAIRS:** Not applicable

**OBJECT CLASS:** No object class needed on these entries.

**ITEM: Loss on Disposition of Assets ACCOUNT: 72100**

**FINANCIAL STATEMENT**: Income Statement - Extraordinary Items

**DEFINITION:**

When the asset disposed of does not bring in as much as the book value
of that asset, then there is a loss on the disposal.

**SOURCE:** The sale document or other transaction notification.

**COMMENTS:**

If the asset disposed of does not sell for an amount equal to the book
value (capitalized value less accumulated depreciation) then there is a
loss on the sale. It is still appropriate to treat this loss as an
extraordinary item in that the acquisition and disposal of assets is not
the primary business of this aviation activity. To treat this as an
extraordinary item keeps the loss from distorting the regular net profit
or loss from operations.

The posting of this transaction would be:

> **Debit** the accumulated depreciation
>
> **Credit** the asset account
>
> **Debit** the cash account for the proceeds of the sale and **Debit**
> this account for the remaining amount needed to make the debits equal
> the credits in this posting.

**A-126:** Not applicable

**A-76:** Not applicable

**FAIRS:** Not applicable

**OBJECT CLASS:** No object class needed on these entries.

**ITEM: Litigation settlement costs ACCOUNT: 72300**

**FINANCIAL STATEMENT**: Income Statement - Extraordinary Items

**DEFINITION:**

Cost incurred as a result of a court ordered or negotiated monetary
setllement

**SOURCE:** The settlement document or the court order.

**COMMENTS:**

If the agency is ordered to pay a monetary damage award or such as
settlement is negotiated between the agency and the party involved, a
very real expense is incurred. It is appropriate to treat this expense
as an extraordinary item in that litigation settlement costs are not the
primary business of this aviation activity. To treat this as an
extraordinary item keeps the expense from distorting the regular profit
or loss from operations.

Recording this transaction is accomplished as follows for a retail
purchase:

**Debit Litigation settlement costs** (Expense Account 72200)

**Credi**t Accounts Payable (Liability Account 21100)

When the settlement is paid,

**Debit** Accounts Payable (Liability Account 21100)

**Credit** Cash (Asset Account 10100)

**A-126:** Not applicable

**A-76:** Not applicable

**FAIRS:** Not applicable

**OBJECT CLASS:** No object class needed on these entries.

**ITEM: Accident repair costs ACCOUNT: 72500**

**FINANCIAL STATEMENT**: Income Statement - Extraordinary Items

**DEFINITION:**

For agencies that do not have a Working Capital Fund, this is the cost
incurred as a result of repairing/rebuilding an aircraft that was
damaged in an accident or incident.

For agencies with a Working Capital Fund that have established a
self-insurance reserve fund, this cost is the excess of the cost to
repair less the reserves accumulated in account 29200 (Reserve
Liability).

**SOURCE:** Purchase order. Invoice

**COMMENTS:**

**If an agency aircraft has been involved in an accident or incident it
may be repaired. This is not an ordinary business expense for the agency
since it is not in the business of repairing damaged aircraft.** It is
therefore appropriate to treat this expense as an extraordinary item. To
treat this as an extraordinary item keeps the expense from distorting
the regular profit or loss from operations.

To record this transaction:

> **Debit** Accident repair costs account (account 72500)
>
> **Credit** Self insurance reserve account (accounts payable 29200) --
> If agency has WCF

At the time the invoice is paid, the transaction is recorded as follows:

> **Debit** Self insurance account (accounts payable29200) -- If agency
> has WCF
>
> **Credit** Cash account (asset account 10100)

**A-126:** Not applicable

**A-76:** Not applicable

**FAIRS:** Not applicable

**OBJECT CLASS:** No object class needed on these entries.

**ITEM: Other Losses ACCOUNT: 72900**

**FINANCIAL STATEMENT**: Income Statement - Extraordinary Items

**DEFINITION:**

Costs or expenses so unusual in type or amount as to be accorded special
treatment in the accounts or separate disclosure in the financial
statements.

**SOURCE:** Whatever action or document that identifies the loss.

**COMMENTS:**

Any action that causes the aviation activity to reduce its financial
status or reduce its equity position that came about outside of the
normal operations, other than the loss on disposition of assets
addressed in account 72100.

The posting would be:

> **Debit** this account for the amount of the loss
>
> **Credit** the asset account that was affected

**A-126:** Not applicable

**A-76:** Not applicable

**FAIRS:** Not applicable

**OBJECT CLASS:** No object class needed on these entries.

**ITEM: Prior Period Adjustments ACCOUNT: 74000**

**FINANCIAL STATEMENT**: Income Statement - Extraordinary Items

**DEFINITION:**

Adjustments relating to activity involving gains or losses in prior
periods.

**SOURCE:** The document that causes the loss to be identified.

**COMMENTS:**

This account is seldom used. Only significant amounts from an earlier
accounting period would be posted to this account. Any entry here would
require separate disclosure on the financial statements.

**A-126:** Not applicable

**A-76:** Not applicable

**FAIRS:** Not applicable

**OBJECT CLASS:** No object class needed.

**ITEM: Aircraft Statistical Use ACCOUNT: 90000**

Summary Account

**FINANCIAL STATEMENT**: Not Applicable

**DEFINITION:**

Hours of aircraft use are a very important element in the management of
aviation services. The following accounts will capture all use hours.

**SOURCE:** Aircraft use and activity reports.

**COMMENTS:**

Tracking the utilization of aircraft is of utmost importance to a
complete aircraft cost accounting system. The use of this statistical
data is necessary for many reasons. Just to name a few; historical use
records, hours are needed to determine the cost per flying hour, the
cost per flying hour is used to determine relative operating
efficiencies when comparing one aircraft to another for a similar
mission, total cost are divided by the productive hours flown to
determine the cost recovery rate (income), and to provide for accurate
reporting to management and the FAIRS system of GSA.

Also, the hours flown are the basis for the revenue generating and cost
recovery of this aviation accounting system, as well as the source data
for some of the internally generated expense entries for the reserve
accounts.

**A-126:** Not applicable

**A-76:** Not applicable

**FAIRS:** Not applicable

**OBJECT CLASS:** Not Applicable.

**ITEM: Fixed Wing Flying Hours ACCOUNT: 91000**

Summary Account

**FINANCIAL STATEMENT**: Not Applicable

**DEFINITION:**

All fixed wing (FW) aircraft flying hours will be captured in the
following accounts:

Account

FW Single Engine (SE) 91100 (a summary account)

FW SE Reciprocating Engine 91110

FW SE Turbine Engine 91120

FW SE Jet Powered 91130

FW Multi-Engine (ME) 91200 (a summary account)

FW ME Reciprocating Engines 91210

FW ME Turbine Engines 91220

FW ME Jet Powered 91230

**SOURCE:** Aircraft use and activity reports.

**COMMENTS:**

As these accounts are posted with flying hour activity the system
creates a revenue by taking the hours and multiplying it by the
individual aircraft flying hour rate that is loaded in the aircraft
master record for that aircraft. At the same time a bill is generated to
recover the money from the user information that is present on the
aircraft use report.

**A-126:** Not applicable

**A-76:** 7

**FAIRS:** 16, 48

**OBJECT CLASS:** Not Applicable.

**ITEM: Helicopter Flying Hours ACCOUNT: 92000**

Summary Account

**FINANCIAL STATEMENT**: Not Applicable

**DEFINITION:**

All helicopter (HE) flying hours will be captured in the following
accounts:

Account

HE Single Engine (SE) 92100 (a summary account)

HE SE Reciprocating Engine 92110

HE SE Turbine Engine 92120

HE Multi-Engine (ME) 92200 (a summary account)

HE ME Reciprocating Engines 92210

HE ME Turbine Engines 92220

**SOURCE:** Aircraft use and activity reports.

**COMMENTS:**

See comments on account 91000, the same apply here.

**A-126:** Not applicable

**A-76:** 7

**FAIRS:** 16, 48

**OBJECT CLASS:** Not Applicable.

**ITEM: Fixed Wing Block-to-block Hours ACCOUNT: 93000**

Summary Account

**FINANCIAL STATEMENT**: Not Applicable

**DEFINITION:**

All fixed wing (FW) aircraft block-to-block hours will be captured in
the following accounts:

Account

FW Single Engine (SE) 93100 (a summary account)

FW SE Reciprocating Engine 93110

FW SE Turbine Engine 93120

FW SE Jet Powered 93130

FW Multi-Engine (ME) 93200 (a summary account)

FW ME Reciprocating Engines 93210

FW ME Turbine Engines 93220

FW ME Jet Powered 93230

**SOURCE:** Aircraft use and activity reports.

**COMMENTS:**

As these accounts are posted with block-to-block hour activity the
system creates a revenue by taking the hours and multiplying it by the
individual aircraft hour rate that is loaded in the aircraft master
record for that aircraft. At the same time a bill is generated to
recover the money from the user information that is present on the
aircraft use report.

**A-126:** Not applicable

**A-76:** 7

**FAIRS:** 16, 48

**OBJECT CLASS:** Not Applicable.

**ITEM: Helicopter Block-to-block Hours ACCOUNT: 94000**

Summary Account

**FINANCIAL STATEMENT**: Not Applicable

**DEFINITION:**

All helicopter (HE) block-to-block hours will be captured in the
following accounts:

Account

HE Single Engine (SE) 94100 (a summary account)

HE SE Reciprocating Engine 94110

HE SE Turbine Engine 94120

HE Multi-Engine (ME) 94200 (a summary account)

HE ME Reciprocating Engines 94210

HE ME Turbine Engines 94220

**SOURCE:** Aircraft use and activity reports.

**COMMENTS:**

See comments on account 93000, the same apply here.

**A-126:** Not applicable

**A-76:** 7

**FAIRS:** 16, 48

**OBJECT CLASS:** Not Applicable.

**Appendix A**

**Accounting Overview**

**Appendix A**

**ACCOUNTING OVERVIEW**

In order to fully understand the accounting system described in the CAG,
it is necessary to have a basic understanding of accounting. Accounting
has two broad functions. The first is the measurement or the
accumulation of reliable economic data reflecting the financial progress
and status of an organization. The second function of accounting is
communication, or the reporting and interpreting of these data in a
manner that facilitates decision making.

**A.1 Primary Financial Statements**

The Financial Statements are the documents that report on an
organization in monetary terms. Most of the financial information needed
is contained in the following financial statements:

-   balance sheet,

-   income and expense statement,

-   statement of owners\' equity, and

-   cash flow statement.

A.1.1 Balance Sheet

The **Balance Sheet** (also known as the statement of financial
position) is the primary financial statement that illustrates an
organization\'s financial resources and obligations at a particular
date. The balance sheet is the statement that shows the relationship
among assets, liabilities, and owners\' equity. The assets must always
equal liabilities plus owners\' equity. A key point to remember
regarding this statement is that it represents a snapshot in time.

A.1.2 Income and Expense Statement

The **Income and Expense Statement** (also known as the statement of
earnings) is the primary financial statement that summarizes the
revenues generated, the expenses incurred, and any gains or losses
incurred by an organization during a certain period of time. This
statement presents financial data in a manner that is consistent, easily
understood, provides easy comparison with prior periods and lends itself
to further analysis and reports. The income and expense statement also
provides the details that support the changes in the balance sheet from
one accounting period to the next.

A.1.3 Statement of Owners\' Equity

The **Statement of Owners\' Equity** is a companion document to the
income and expense statement and it provides an explanation of how the
owner\'s equity changed from one balance sheet to the next.

A.1.4 Cash Flow Statement

The **Cash Flow Statement** is the last major report in the group of
documents called financial statements. This statement looks at the
financial status of an organization from the point of view of how much
actual cash it has available. This is important because a viable
organization requires cash to pay bills. Even if the organization is
highly profitable, there are any number of circumstances under which it
can find itself without sufficient cash to meet its financial
obligations. For example, a company may have acquired new machinery and
expanded its inventory substantially as a result of a surge in demand
for its product. If at the same time, it has not paid attention to its
cash inflow, it may have so much money tied up in its new machinery and
inventory that it doesn\'t have sufficient cash to pay the bills. It may
literally be forced to shut down because of its success!

A.1.5 Other Reports

There are numerous other reports that can be obtained from an accounting
system. Each of these provides an insight into a specific aspect of the
organization\'s financial condition. There are a number of standard
reports that are commonly used, such as the Accounts Receivable Report
and the Inventory Report. Other reports can be customized to focus on
the specific information needs of a particular organization. These might
include reports on the cost of producing a particular product or
service, the cost and revenues of a particular contract or the cost and
revenues generated by a particular operating location.

**A.2 BASIC ELEMENTS OF FINANCIAL STATEMENTS**

Governmental accounting systems must support the information needs of
individuals internal and external to a department or agency. Using
**financial accounting**, an agency can measure and report on a periodic
basis the financial status and operating results of an agency\'s
aviation program to external parties including the Office of Management
and Budget (OMB), the General Services Administration (GSA), Office of
the Inspectors General (IG), and others. **Cost accounting** (also known
as managerial accounting) helps agency managers make decisions in
support of planning, budgeting, controlling costs, evaluating
performance, and generating revenues. Basically, *cost accounting*
specifies how to take the *financial accounting* data collected and
perform analyses to support operational decision-making.

The purpose of financial statements is to provide information about an
organization\'s economic resources and condition. The basic elements of
the typical financial statements are assets, liabilities, owners\'
equity, revenues, expenses, gains, losses, and net income (or loss).
These elements are listed as accounts on the financial statements. An
**Account** is an accounting record in which the results of similar
transactions are accumulated.

**A.2.1 Assets**

**Assets** are the economic resources owned by an organization that are
expected to have future economic benefits. Assets include:

-   cash in the US Treasury,

-   money owed by others for services rendered that has been invoiced
    (accounts receivable),

-   prepayment on goods or services including progress payments made to
    vendors,

-   inventories of spares for the aircraft and aircraft related
    equipment,

-   facilities used for the aircraft, spares inventory and aviation
    department personnel, and

-   aircraft and aircraft support equipment or tools.

In short, assets are what the entity has available to perform its
assigned tasks and pay its bills.

An important point to consider in setting up asset accounts is to make
sure that the assets are not claimed twice, i.e., once by the aviation
department and once by some other section of the agency. Two areas where
this can be particularly troublesome are cash and facilities. Cash
accounts can create a problem if the aviation department shares its cash
account(s) with other parts of the organization. Facilities can present
a similar problem if they are shared with other non aviation operations.
In the case of cash accounts, the solution is to set up a separate
aviation cash account. In the case of shared facilities, an agreement
can usually be made with the other users. However when such an agreement
is made, it is important that the expenses associated with such a
facility are also apportioned among the various users.

Aircraft should be entered as assets only if they are fleet aircraft and
are owned, lease-purchased, borrowed, or leased for 180 days or more.
Aircraft that are obtained as commercial aviation services (CAS), that
is, aircraft that are hired under a full service contract, chartered,
rented, or leased for less than 180 days, are not considered assets.

(See FAIRS definitions in Appendix D).

**A.2.2 Liabilities**

**Liabilities** are the obligations of an organization to pay cash or
other economic resources in return for past, current, or future
benefits. Liabilities represent claims against assets. Liabilities
generally include the following:

-   moneys owed to others for goods or services provided (Payables),

-   wages, salaries, and benefits owed but not yet paid,

-   taxes owed but not yet paid,

-   the unpaid portion of debt and loans,

-   remaining lease payments on capital lease, and

-   funds accrued as a reserve for future events (such as engine
    overhauls).

It is important to remember that liabilities are the moneys owed at a
certain point in time (normally the end of the accounting period under
consideration), not the total expenses of the operation. Expenses are
covered separately. These obligations to others may include moneys owed
to other Government agencies for services rendered, for example for
rental of hangar facilities from another Government organization.

If the lease of an aircraft was entered under assets as a capital lease,
then the unpaid lease payments must be entered as a liability.
Similarly, if an aircraft is financed with a loan, the remaining, unpaid
balance of that loan must be entered as a liability.

**A.2.3 Owners\' Equity**

**Owners\' Equity** is the owners\' interest in the assets of an
organization. In other words, owners\' equity is what is left over after
the liabilities are subtracted from the available assets. Equity
basically consists of the following two items:

-   capital paid into the enterprise by the owner(s) and

-   retained earnings.

At first glance it may seem inappropriate to apply these items to
Government operations. They are, however, both valid and directly
applicable. Capital paid in by the owners for Government operations
occurs when the Government purchases an aircraft or facility or some
other piece of capital equipment and pays for it with cash.

Similarly, if an aircraft is transferred from another agency, the
Government has decreased its equity in the agency that is relinquishing
the aircraft and has increased its equity in the agency that is
acquiring the aircraft.

When there is a difference between the total revenues and total expenses
during a period of time, the difference is either a net income (if
revenues are greater than expenses) or a net loss (if expenses are
greater than revenues). At the end of each accounting period this net
income or loss is added to the \"retained earnings\" which remain in the
US Treasury.

**A.2.4 Revenues**

**Revenues** are the resource increases resulting from the sale of goods
or services. Revenues are primarily derived from the normal operations
of the organization. Revenues provide the funds that pay the bills,
salaries, and other expenses of any enterprise. Government operations
are no different in that they too receive revenue. There are basically
three types of revenue for a Government agency that operates aircraft:

-   budgetary funds,

-   income from sales of goods and services, and

-   other income.

Almost every Government agency is the recipient of budgetary funds.
These are the funds provided by the Treasury in accordance with the
Government budgeting process.

The second type of revenue is applicable if the agency operating the
aircraft sells its aviation services to another organization and
receives payment for it. This may be another Government agency, a state
or local government, a foreign government or individuals and companies.
The key is that if the agency receives compensation for its services it
should be classified and recorded as revenue. Similarly, revenue results
if the agency sells an asset, such as a facility or an aircraft. Note
that if this occurs and the price received is more or less than the
value to which the asset had been depreciated, an additional entry is
made in the Gains/Losses/Extraordinary Items account (see Section A.6).
If an aircraft is traded in on a new aircraft, the trade-in allowance
for the aircraft should be entered here as revenue, in order not to
distort the value of the new aircraft.

The last category is revenue derived from all other sources. This
category is usually reserved for revenues that are not part of the
organization\'s regular business. Examples of revenues that fit this
category are interest earned on bank deposits and securities, income
from fines, late payment penalties, etc..

**A.2.5 Expenses (Operating Costs)**

Expenses represent the costs of using the assets or additional
liabilities incurred in the course of an organization's operation.
Expenses fall into a number of distinct and separate categories, and it
is important to collect and track them in that manner.

The four basic groups of expenses are:

-   variable operating costs,

-   fixed operating costs,

-   operations overhead costs, and

-   administrative overhead costs (also known as applied overhead or
    general and administrative expense)

The reason for tracking these costs separately is that each is the
result of a fundamentally different activity. The first and second are
associated with flying and owning the aircraft. The third is associated
with the day-to-day management of that flight operation and the fourth
is associated with the overall management of the organization that has
an in-house flight aircraft operation.

**A.2.5.1 Variable Costs**

Variable costs are a direct function of flying the aircraft. In other
words, these costs are zero if the aircraft is not flown. The most
obvious of these costs is fuel \-- if the aircraft doesn't fly, it does
not consume any fuel and fuel costs are \$0. Variable costs include, but
are not limited to, the following expenses:

-   fuel and lubricants,

-   crew costs (per diem, overtime, part-time),

-   aircraft lease/rental (hourly rate),

-   landing fees, ground services

-   maintenance labor & parts, and

-   maintenance reserves.

    The detailed definitions of each item are found in Appendices D, E,
    and F.

**A.2.5.2 Fixed Costs**

Fixed costs are a direct function of owning the aircraft. They are
incurred whether the aircraft flies or not. An example of this type of
cost is hangar rental \-- the rent is the same whether the aircraft
flies or not. Fixed costs include, but are not limited to, the following
expenses:

-   crew costs (salary and benefits for full time pilots),

-   maintenance costs (calendar-based inspections, etc.),

-   aircraft lease (monthly fee),

-   ground services at home base

-   depreciation, and

-   self - insurance.

    The detailed definitions of each item can be found in Appendix D, E
    and F.

As can be seen, some costs (i.e., crew cost and maintenance cost) have
both variable and fixed components. This is because they are a function
of both flying and owning the aircraft. The chart of accounts shown in
Section 3.2.1 takes this and similar situations into account and allows
the associated expenses to be assigned to different account numbers.

**A.2.5.3 Operations Overhead Cost**

Operations overhead costs are associated with the direct management and
administration of the aircraft operation. Included in this category are
the aviation manager, the dispatcher, the administrative personnel
assigned to the unit, office and hangar rental costs, office supplies,
janitorial services, etc.. For a unit that has a maintenance facility
the maintenance manager would be a burden cost on direct labor as
contrasted to operations overhead. If you have a maintenance manager
that is not part of a government maintenance facility, then the
maintenance manager would be charged to operations overhead. In general,
this category of expenses (i) does not extend beyond the aviation
department manager and (ii) should include all costs that are not
assigned to variable or fixed cost categories but could be eliminated if
the agency did not own and/or operate any aircraft. The difficulty with
these costs is their allocation to a specific aircraft. The approaches
available for allocating costs are discussed in section A.2.5.5.

**A.2.5.4 Administrative Overhead Costs (Applied Overhead)**

Administrative overhead is often referred to as applied overhead or
General and Administrative costs. These costs are all the administrative
and management support costs that are provided by other sections of the
agency or organization in support of the aviation department. Examples
of this include payroll, personnel, accounting, legal services, etc., as
well as the time of senior management devoted to the supervision of the
aviation department. The difficulty with these costs is that while these
costs are very real, it is often very difficult to define them and
establish a dollar value for them. As with Operations Overhead costs,
the test of whether or not to include these costs in accounting for
aircraft expenses is: If you disposed of your aircraft, and these costs
remained, they are programmatic costs and not appropriately charged to
aircraft expenses. Only costs which are able to be directly associated
to the aircraft are legitimate aircraft expenses. There are basically
two approaches to obtaining these costs.

1\. In the first approach, estimate the number of hours provided per
year by each of the departments and senior management in support of the
aviation department. Multiply this by each individual\'s estimated
hourly salary rate. Add these totals and multiply by the current OMB
established rate for average federal employee fringe benefits (typically
about 29%) [or]{.underline} the actual historical fringe benefit costs
of the agency, to account for benefits, utilities, office space, etc.,
used by these individuals. This will provide a fairly realistic annual
cost figure for administrative overhead. This cost can then be allocated
as discussed below. This method can also be used to check the realism of
the second approach to applied overhead costs.

2\. In the second approach, the administrative overhead cost is
established by the agency\'s accounting department and is applied to all
operating units of the agency as a percentage to be applied to all
department expenses.

**A.2.5.5 Allocation Methods**

**Allocation** is the process of dividing costs or revenues among
various cost or program elements[^1]. This process is a very necessary
part of determining the total cost per hour or per year of a particular
aircraft, contract, or program. The allocation method selected must be
simple enough to be easy to use and understand. At the same time, it
must be a fair representation of how these costs are incurred to support
each product or service. If that is not the case, then one or the other
of the products or services will be burdened unfairly. Typical measures
used to allocate costs in aviation programs are:

-   number of aircraft,

-   number of hours flown,

-   number of passengers,

-   value of the aircraft, and

-   variable costs of the aircraft.

Depending on the level of sophistication of the accounting program more
than one measure of allocating costs may be used.

However the method of allocation is set up, it is very important to
record the method used and re-examine it whenever there is a significant
change in the flight operation (such as the addition or deletion of an
aircraft, or a major change in mission or number of hours flown). Even
if nothing changes, it is still worthwhile to examine the method of
allocation at least annually to see if the resulting figures pass a
\"reality test\". Overhead costs, that are not the result of the
ownership or operation of the aircraft, are not to be allocated to
aircraft costs. A simple test will help to determine if certain overhead
costs are appropriately allocable to aircraft. The question to be asked
is: "If the government disposed of its fleet aircraft, but instead
received these services through some other method (charter, lease (\<180
days)4/11/2002, cooperative agreement, etc.), which of these costs would
remain?" Any remaining costs such as the salaries, benefits, support,
supplies, rent, and misc. associated with personnel or facilities
necessary to manage aircraft services obtained through charter, lease,
cooperative agreement, etc., are *programmatic costs* and are not to be
allocated to owned aircraft. For example, if the agency owns no
aircraft, it may still need an aviation manager, aviation safety
officer, flight scheduler, flight dispatcher, airport, heliport, or
other infrastructure in order to assure safe and efficient use of
aircraft services. The costs of these personnel and infrastructure are
real costs of the program but are not allocable to an agency's aircraft.
Additionally, the costs of obtaining and maintaining security clearances
for aviation personnel are *programmatic costs*.

After identifying and subtracting programmatic costs, two common methods
for developing allocation schemes follows:

[Allocate by Hours flown]{.underline}

With this method of allocation, the selected total cost of the applied
overhead is allocated among the various aircraft in the operation on the
basis of the hours flown flown by each aircraft. This is a good method
if all aircraft have about the same productive capacity but fly
different number of hours per year.

For example, assume that applied overhead is \$200,000 for an operation
with 5 medium sized turboprop aircraft. Two (2) aircraft are special
purpose aircraft that fly only 200 hours per year each, while the other
3 aircraft fly 700 hours each. The total fleet flies 2500 hours per year
and each aircraft should be allocated \$80 per flying hour to allocate
operations overhead fairly.

[Allocate by Budgeted Operating Cost per Flying hour]{.underline}

With this method of allocation, the total cost of the applied overhead
is allocated among the various aircraft in the operation in proportion
to the total operating budget for each aircraft or each type of
aircraft. This method is necessary if the aircraft have significantly
different productive capacity. It is even more important if the
different types of aircraft also fly significantly different number of
hours per year.

For example, again assume that applied overhead is \$200,000 for an
operation with 5 aircraft \-- 2 single engine piston aircraft that fly
350 hours per year each and 3 small jets that fly 600 hours per year
each. The approximate annual budget is \$63,500 for each of the piston
aircraft and \$847,500 for each of the jets. In this case, the total
fleet still flies 2500 hours per year, however, each piston aircraft is
assigned \$4,750 of overhead (\$13.60 per Flying hour), while each jet
is assigned \$63,500 (\$105.80 per Flying hour).

There are many other ways of allocating costs. As can be seen from these
examples, all good allocation schemes have in common the fact that they
i) establish an equitable method of allocation to make sure one aircraft
or type of aircraft does not get burdened unfairly and ii) are easy to
establish and administer.

The method of allocation can and should be changed if circumstances
change. To minimize confusion, changing allocation method is usually
done at the beginning of a new accounting period (month, quarter or
year).

**A.2.5.6 Reserves and Working Capital Fund (WCF) Accounts**

The maintenance of almost all aircraft involves the expenditure of large
sums of money on a periodic basis for the overhaul or replacement of
major components. The sums of money involved are often very large
compared to the cost of other maintenance. For example, overhaul of a
pair of engines can be as much as \$1,000,000 or more for a large
business jet and a set of rotor blades for a helicopter can cost
\$100,000.

Many commercial and corporate operators of aircraft prefer to set up a
reserve fund to pay for these large periodic expenditures for several
reasons. First, the funds will be available when required. Second,
adding the cost of reserves to the regular hourly operating cost gives a
much more realistic picture of the operating cost of the aircraft.

Reserve accounts can be used in WCF programs but reserves cannot be
incorporated into the accounting system for appropriated programs.
Managers with appropriated funding should still calculate these expenses
as if they were reserve items in order to understand the true cost of
operating the aviation program. These reserve expenditures must also be
incorporated into cost comparison studies and life cycle cost analyses.

OMB direction regarding cost comparisons (such as Circular A-76)
requires that the cost of reserving for these major overhauls and
component replacement be shown and incorporated in the calculations. To
incorporate these reserves in the accounting system requires that the
reserves be charged as an expense against a special reserve expense
account. These funds are accumulated as a liability until the time an
actual expense is made for an overhaul or component replacement.

To calculate the hourly reserve charges, the following procedure may be
used:

-   Establish the major components that need to be overhauled or
    replaced on a periodic basis. As a minimum, the engine(s) need to be
    included in this category. In addition, on helicopters, the major
    dynamic components (rotor blades, transmissions, drive shafts and
    mast) should be included. For many fixed wing aircraft, the landing
    gear should be included in this category.

-   Determine the cost of overhaul or replacement and the interval
    between overhauls/replacements. Agency records can be used for this.
    In addition, most manufacturers will provide this information.

-   Divide the cost of overhaul/replacement by the associated interval.
    This yields a cost per hour for each component. The total amount to
    be reserved on an hourly basis may then be obtained by adding the
    hourly costs of all components.

-   Review this cost at least annually to incorporate actual costs
    incurred and changes in projected cost and overhaul/ replacement
    interval.

Typically, a reserve fund will accumulate money for a number of years
before the funds are used to pay for an overhaul or component
replacement. This is particularly true for many operators of government
aircraft, because the interval between overhauls and/or major component
replacement is usually 1500 to 3500 hours \--many years flying for a
typical government operator.

Government agencies may be able to set up reserve funds by following the
special procedure needed to set up a WCF. Additional information on
setting up a WCF can be found in Federal budgeting guidelines.

**A.2.6 Gains, Losses, and Extraordinary Items**

**Gains (or losses)** are the net increases (or decreases) in an
organization's resources resulting from peripheral activities or
associated with non-recurring, unusual events or circumstances. There
are three main categories of gains and losses. The first includes gains
and losses due to sale of assets (such as aircraft), settlements of
lawsuits, discontinued operations, etc. These are not extraordinary
items, since these are considered part of normal business activities.
However, because they are not part of the organization's central
operations, they are reported as gains or losses instead of being
reported as revenue or expense.

The second category of gains or losses is extraordinary items.
**Extraordinary Items** are the gains and losses resulting from events
that are unusual, unpredictable, and infrequent and not a part of normal
business operations. These include losses resulting from natural
disasters (such as hurricanes, tornadoes and flooding), expropriation of
property by a foreign government, etc.

The third category covers adjustments to the financial results of prior
accounting periods. The only gains or losses that may be recorded here
are those that result from computational errors, errors in the
application of accounting principles, or errors in the interpretation of
information available at the time the financial statements for the prior
period were being prepared. Note that changes in accounting estimates
(for example the loss associated with a natural disaster) made in prior
periods should be recorded as either changes in revenue/expense or
gains/losses, but not as a an adjustment to a prior period. The reason
is that the estimate changed not because an error was made but because
more information became available.

In all cases, the gain or loss involved could be recorded as regular
revenue or expense. However, this would distort the financial results
for the period in question and thereby make year-to-year comparisons
meaningless. Gains, Losses, and Extraordinary Items are recorded on the
income/expense portion of the financial statement and thus impact the
net profits (net results of operations). In turn, the net results of
operations for the year are added to the cumulative results of
operations (retained earnings) on the balance sheet.

A typical example that illustrates the use of this account occurs when
an aircraft is sold for more or less than the value to which it has been
depreciated (the book value). Assume an aircraft was originally
purchased for \$5,000,000. It has been depreciated to \$2,000,000 (the
book value) and it is sold for \$3,000,000. The revenue received from
the sale (\$3,000,000) is greater than the book value of the aircraft
(\$2,000,000); therefore, there is a net gain (profit) of \$1,000,000.
This profit is accounted for in the Gains/Losses/Extraordinary Items
account by recording a one-time gain of \$1,000,000. Similarly, if an
asset is sold for less than its book value, the net loss is also
recorded in this account.

Another example of the use of this account is as follows. Assume an
organization sustained damage in a hurricane in the previous year. To
repair the damage was estimated to cost \$500,000 and was recorded as a
loss in the previous year\'s Gains, Losses, Extraordinary Items account.
All repairs have been completed in the current year for a total cost of
\$595,000 \--\$95,000 more than was accounted for in the previous year.
To make this adjustment, the organization would enter a further loss of
\$95,000 in this year\'s Gains, Losses, and Extraordinary Items account.
In addition, the organization will include a note in its financial
statement to explain last year\'s and this year\'s charges.

Thus, the principal reason for having this account is to record changes
in financial status that are the result of activities that are not part
of the central operation of the organization. If the gains or losses
recorded in this account were recorded as revenue or expense, they would
distort the financial results of the organization\'s central operation.

**A.2.7 Net Income (Net Loss)**

**Net Income (Net Loss)** is a measure of the overall performance of the
organization. Net income is equal to revenues plus gains, minus expenses
and losses for a given period. As such, it reflects the organization's
financial accomplishments.

**A.3 Basic Accounting Concepts**

Accounting is the measurement of the financial activities and the
maintenance of the financial records of an organization. The
organization can be for-profit, non-profit, or a Government agency.

The accounting system systematically records the financial transactions
and facts in a logical and agreed upon manner. The results and financial
status can then be presented fairly and understandably to management and
others who have a need to know. Equally important, the records and
reports can answer basic questions, such as, how much does this product
or service cost? Is it profitable? How does its cost compare to other,
similar products or services? What are the components of the overall
cost of a product or service?

The fundamental fact of accounting is that Assets always equal
Liabilities plus Owner\'s Equity. This is usually expressed as follows:

**Assets = Liabilities + Owner\'s Equity**

Or put a different way:

**Owner\'s Equity = Assets - Liabilities**

In other words, the Owner\'s Equity is what is left over after all the
obligations to outsiders have been subtracted from the available assets.

A.3.1 Data Collection (Forms)

Good data collection is the key to having an accounting system that
works and provides the required data. The most effective way to collect
the required data is to **[establish and enforce the use of a system of
forms]{.underline}** designed to provide the needed data. Four important
aspects of using forms are to make sure that:

-   each form has someone (pilot, maintenance technician, dispatcher,
    fuel truck operator, etc.) clearly responsible for its completion;

-   the recipient(s) of each form is/are clearly designated and there
    are sufficient copies in the form so that all who need the
    information will get it;

-   proper completion of the forms on a timely basis is monitored and
    enforced; and

-   all major forms are prenumbered with unduplicated numbers.

It should be stressed that without the data available from these input
forms, any accounting system will fail. Appendix B provides detailed
information on establishing a system of forms needed for the collection
of aviation financial and management data.

A.3.2 Double Entry Accounting

**Double Entry Accounting** is a system of recording transactions so
that the equality of the accounting equation (Assets = Liabilities +
Owner\'s Equity) is always maintained.

The fundamental concept in this equation is that debits must always
equal credits. In order to further clarify this concept, some terms must
be defined. First, an **Account** is an accounting record in which the
results of similar transactions are accumulated. The account will show
increases and decreases as a result of normal activities. The account
will also always have a balance, which is the net result of the
increases and the decreases. In accounting, increases and decreases in
accounts are expressed as **\"debits**\" and \"**credits**\".
Unfortunately, the meaning accounting assigns to these terms is **not**
the same as common usage assigns to them. Debits are entries on the left
side of an account. Credits are entries on the right side of an account.
The left side of an account can mean positive or negative, depending on
what type of account it is. For example, asset accounts, being on the
left side of the balance sheet, have a debit balance; therefore, a debit
entry increases an asset account and a credit entry decreases an asset
account. Liabilities and owner\'s equity accounts, are on the right side
of the balance sheet and normally have credit balances; therefore, a
credit entry increases these accounts while a debit entry decreases
these accounts.

The important point for a manager to remember is that when an accountant
speaks of debits and credits, the impact of this on an account depends
on what type of account it is.

With double entry accounting all financial transactions have a dual
effect. For example, if the organization purchases a truckload of fuel
for its fuel inventory, two things have happened from an accounting
point of view. The first is that its inventory (an asset) has increased
by the value of the fuel bought. The second is that its liabilities were
increased by the cost of the fuel (a payable), or cash (an asset) was
decreased by the payment for the fuel. Thus, the fundamental accounting
equation stays in balance. Similarly, if revenue is generated by a
flight, assets are increased by the amount of revenue earned (a
receivable). At the same time, but separately, expenses were incurred
for fuel, salaries, depreciation, etc., which increases liabilities.
And, if the revenue earned is greater than the expenses incurred (i.e.,
there is a profit), the owners equity will increase by the difference
between the increase in assets and the increase in liabilities.

This dual effect of all financial transaction is the reason this type of
accounting is called Double Entry Accounting. The key point to remember
is that for every financial action, there is an equal and opposite
financial reaction.

A.3.3 Audit Trail

The purpose of auditing the financial records of an organization is to
make sure that the financial statements reflect its financial condition
fairly and accurately. There are many reasons for doing this. The
primary reason is to ensure that management is basing its decisions and
plans on realistic numbers.

The objective of an audit trail is that any expense incurred, asset
acquired, income received, etc. by that organization can be traced from
the original invoice, trip request, purchase order or check to the
financial statement. The system must also allow the reverse to be
accomplished.

The accounting system described in the following sections achieves this
objective because each transaction is recorded individually in one of
the journals, by date, amount, account number and check number (expense)
or invoice number (revenue). In turn, the reference to the check number
or invoice allows further checking to the source document (purchase
order, work order, etc.). After being recorded in a journal, the
financial data is combined in the general ledger and presented in the
financial statement. Thus, by definition, the financial statement
summarizes all financial transactions and any account can be traced back
to its original paperwork.

Basically, when an auditor performs an audit, he or she ascertains two
things. The first is that all expenses incurred and revenues received by
the organization being audited are all included properly and are all
fully traceable from the original invoice, check, purchase order, etc.
to the financial statement (i.e., there is an audit trail). The second
is that all assumptions and methods used for allocation of costs,
valuation of assets, etc. are done on a consistent basis that is
logical, legal, and meets certain standards. When both these conditions
are met, it is said that the financial statements conform to Generally
Accepted Accounting Principles.

There are three kinds of financial statements that an organization can
produce. All three are produced by an accounting system described in
this CAG. The difference lies in the amount of scrutiny these financial
statements have received from an independent auditor.

The first is in the proper format for a financial statement, but has not
been examined by an independent auditor other than to make sure it is in
the appropriate format. This is referred to as an \"unaudited\"
financial statement.

The second is when an accountant has looked at the financial statement
from the point of view of whether the numbers pass a basic reality
check. This is referred to as \"unaudited but reviewed\" financial
statement.

The last is when a qualified accountant performs a check of the audit
trail, the internal controls, the various assumptions used, etc. When
this has been accomplished, the financial statements are referred to as
\"audited and found to be in compliance with generally accepted
accounting principles.\"

When implemented properly, an accounting system such as described in
this CAG will provide the required audit trail with no additional
effort.

**A.4 The Accounting Process (Accounting cycle)**

The accounting process is the means by which financial activities are
transformed into accounting reports that can be interpreted and used in
decision-making. This process is also known as the **Accounting Cycle.**

The accounting cycle illustrated in Figure A1 and explained below is
based on an **Accrual Basis** accounting model. An accrual basis
accounting system is an accounting system that recognizes revenues and
expenses as they are earned and incurred, not necessarily when cash is
received or paid. A **Cash Basis** accounting system recognizes revenues
and expenses only when cash is received or paid.

A.4.1 Source Documents

The accounting cycle begins with source documents that are the records
of transactions used for the basis for recording accounting entries.
Source documents include purchase orders, invoices, checks, expense
accounts, work orders, inventory counts, etc.. These documents confirm
that a transaction has occurred and establish the amounts to be
recorded.

A.4.2 Journalize Transactions

A journal is an accounting record in which transactions are first
entered. It provides a chronological record of all business activities
(also known as a book of original entry). The journal will show the date
of the transaction, the amount, the accounts affected, and a brief
explanation of the transaction. Debits must always equal credits in a
journal entry.

Journals are very similar to ship or aircraft logs in that they present
a chronological listing of the events affecting the organization.
Typically, an organization will maintain several of these journals to
record different types of financial transactions. Examples of journals
that may be used by a typical organization are the Revenue Journal, the
Purchases Journal, the Payroll Journal and the General Journal. There
are no hard rules as to what journals need to be kept, except that
clearly separate activities should be clearly separated.

There are several rules to be observed when entering journal entries.

-   The most important one is that each entry is posted to its proper
    account (i.e., fuel purchases are posted to \"fuel\", not
    \"maintenance labor\" or \"insurance\").

-   The principle of dual entry is maintained. For example, when the
    rent is paid, this should appear both as an increase in expenses and
    a decrease in assets (cash).

-   The source of the information recorded is clearly indicated (usually
    by date, vendor and document number). The reason for this is that it
    is a key link in building traceability from the final financial
    statements back to the source documents.

Entering each transaction into its proper accounts requires that the
various accounts be carefully defined and that there are enough
different accounts to reflect all the categories of cost and revenue
that need to be tracked. Furthermore this needs to be done in such a
manner that subsidiary accounts can easily be collected into their
overall account. For example, it may be important for an operation to
track bulk fuel purchases, contract fuel purchases, and individual,
retail fuel purchases. At the same time, from management\'s point of
view, the only figure of interest is total fuel purchases.

To accomplish this, an organization will establish a **\"Chart of
Accounts.\"** This chart establishes the various accounts under which
each financial transaction will be listed. Each account is clearly
defined and is assigned a multi-digit number. Section 3 contains a
detailed explanation of the Chart of Accounts.

A.4.3 Post Journal Entries to Accounts

After transactions are recorded in the general journal or the various
specialized journals, they must be classified and grouped by similar
items into common accounts and entered into the General Ledger. This
process is called posting. The **General Ledger** is an accounting
record of all accounts of the organization**.** In other words, all
activity from the various journals for one particular account are summed
and then \"posted\" to the matching account number in the General
Ledger. Thus, the General Ledger summarizes all the information
collected in the various journals. Very importantly, the General Ledger
collects the data in such a manner that, after the appropriate additions
and subtractions are performed, it produces the information required for
the financial statements. Of course, the information from the journals
can also be posted to subsidiary ledgers that show more detail for a
particular group of accounts in order to meet management information
needs.

A.4.4 Prepare a Trial Balance Sheet

At the end of the accounting period, the accounts in the General Ledger
are reviewed and the account balances are determined. Once this is
complete, a **trial balance** is prepared to check the accuracy of the
previous steps. The trial balance lists each account with its associated
debit or credit balance. The objective is for total debits to equal
total credits.

A.4.5 Prepare a Work Sheet

The next step is to prepare a **work sheet**. This is a columnar
schedule used to summarize accounting information. The work sheet lists
the trial balance, adds adjusting entries and extends the resulting
figures into the financial statement columns. The figures are then used
in preparing the balance sheet, income and expense statement, and other
financial reports.

A.4.6 Adjusting Entries

**Adjusting Entries** are required at the end of each accounting period
to recognize, on an accrual basis, revenues and expenses for the period
and to report proper amounts for assets, liabilities and owner\'s equity
accounts. An agency must make sure that all account balances are
appropriate and that all revenues and expenses are recognized before
financial statements can be prepared. This is accomplished by making
adjusting entries. Adjustments are generally required at the end of each
accounting period. The following type of accounts normally require
adjustments:

-   [Unrecorded revenues]{.underline} \-- revenues not previously
    recognized that are earned but not received by the end of the
    accounting period.

-   [Unrecorded expenses]{.underline} \-- expenses not previously
    recognized that are incurred but not yet paid for by the end of the
    accounting period.

-   [Unearned revenues]{.underline} \-- Payments received before they
    are earned.

-   [Prepaid expenses]{.underline} \-- Payments made in advance for
    items normally charged to an expense account.

The basic purpose of adjusting entries is to bring account balances to
their correct amounts so that the financial statements will reflect the
proper amounts at the end of the accounting cycle.

A.4.7 Prepare Financial Statements

Once all transactions and the adjusting entries have been analyzed,
journalized, and posted, the accounts can be summarized and be presented
in the **financial reports** generated. The information for both the
balance sheet and the income and expense statement can be taken directly
from the work sheet. These financial statements should be prepared as
soon as possible at the end of each accounting period.

A.4.8 Post Adjusting Entries

After the financial statements have been prepared, all **adjusting
entries** need to be journalized and posted to the appropriate accounts.
When that step is complete, the closing entries can be made.

3.4.9 Closing

Posting **Closing Entries** is the process whereby the revenue and
expenses accounts (referred to as \"nominal\", or temporary, accounts)
and the resulting net income are set back to zero at the end of an
accounting period; transferring their pre-closing balances to the
owners\' equity accounts (referred to as a \"permanent\" balance sheet
account). This process is required to measure the income, expense and
net income of that next accounting period.

When the closing entries have been posted, the last step in the
accounting cycle is the preparation of a post closing trial balance. A
post closing trial balance is a listing of all real accounts (assets,
liabilities and owners\' equity) and their associated balances after the
closing process has been completed. This step checks that all nominal
accounts were closed out properly by checking that the debits equal the
credits for all real accounts prior to beginning the new accounting
period.

**Appendix B**

**Forms**

**Appendix B**

**FORMS**

As discussed in earlier sections of the CAG, one of the most important
objectives when developing an accounting system is to satisfy the output
requirements of an organization. One of the principal tools to help an
organization meet its output requirements is a well-designed chart of
accounts. However, an organization\'s planning must not stop there.

Another, equally important part of the accounting system, which must
also receive proper planning is the collection of cost data. An
organization could properly identify its reporting requirements and
design the \"perfect\" chart of accounts but if the data flowing into
the system is not accurate and relevant then the common saying of,
\"garbage in garbage out,\" becomes applicable.

Basically, an organization can view cost data as coming from two
sources, external to and from within the organization. In either case,
it is very important that the cost data source documents contain all the
information required for proper entry into the accounting system. Thus
each source document needs to contain enough information to determine to
which account number, location, aircraft and contract it should be
assigned. The best way to do this is to have appropriate spaces on each
source document form.

An organization often cannot do much to influence the format of cost
data arriving from external sources, such as vendor invoices. Of course,
with large vendors, or vendors that are on contract, the agency can
specify what data must be contained on the invoice in order to be paid
promptly! It is much more important, though, to channel the available
cost data (invoices) from external sources into a procedure that assures
the required information about account number, aircraft, etc. is added
before it arrives in the accounting department for entry into the
accounting system.

By contrast, organizations can greatly influence how they capture
internally generated cost data. This chapter offers guidance on ways to
develop or modify the most important forms so they capture the relevant
internal cost data. A key point is to make sure the form contains space
and directions for the entry of the required data. This data must be
easy to enter when the form is being used in the performance of a job.
Making the form \"user friendly\" is a lot easier than to recreate or
guess at the data after the job and the form have been completed.

**B.1 Setting Up Forms**

The task of creating forms is an important, but not necessarily
difficult, task. Form design is important because it causes the agency
to think through the logical flow of data from source to output. The
task forces individuals to understand their organization\'s accounting
process. It should not be difficult because the relevant and important
data to capture on forms will become obvious when using proper planning.
Also, not many agencies will have a unique requirement for data for
which a form does not already exist somewhere in the aviation industry.

Once an agency has identified the relevant data it would like to
capture, it must then either develop or find a pre-existing form that
fulfills its needs. Properly developed forms are clear and leave little
doubt as to what data the user needs to complete. Clear forms request
only required data.

Pre-numbering of forms is another issue to consider. For accountability
and auditing reasons, agencies should pre-number their forms. Remember
data captured on forms is the source for information in the required
output. To check the validity and reasonableness of the required output,
agencies must be able to track back through the accounting system to the
source document. Pre-numbering simplifies recording the source of cost
data in each journal entry and assures that records can be found quickly
and without ambiguity when the results are audited.

The effective use of forms requires that personnel performing the
various tasks must enter the appropriate information. This includes not
only the work performed, but also the relevant account number, location
code, contract number etc.. This approach improves accuracy and avoids
unnecessary duplicate work. For a pilot, technician, or clerk to
accomplish this requires that they be given appropriate information
about account numbers, etc.. This can easily be done by printing the
relevant information on the back of the form. This provides an easy
reference. Another way is to have the floor supervisor enter the
information.

This appendix contains a number of samples of forms in use with various
commercial operators.

**B.2 Sample Forms**

This section illustrates examples of basic forms for agencies that are
faced with the task of creating or finding forms for their operations.
Figure 1 identified the basic internal forms that will allow an agency
to capture relevant data for its reporting requirements. The main ones
are:

-   fuel slips,

-   time cards,

-   work orders,

-   purchase orders, and

-   aircraft usage reports.

The following sections illustrate typical examples of forms based on the
ones used by commercial operators. The text that accompanies each form
also identifies the minimum data on each form that agencies should
collect to obtain the necessary cost data.

**B.2.1 Fuel Slip**

General Comments - The purpose of the fuel slip is to record
transactions involving the purchase or consumption of fuel. An
organization should consider the following important data elements when
implementing a form to capture fuel transactions. This form applies
whether fuel is obtained from an agency\'s own fuel supplies or from a
commercial retail vendor. Cost data for fuel that is bought commercially
is usually recorded on a preprinted form supplied by the fuel company or
Fixed Base Operator (FBO). The pilot should make sure that he/she
obtains a copy of this charge slip and attaches it to the fuel form.

**Important Data Elements to Consider**

**(1) Pre-Numbered Form** - Pre-numbered forms offer an organization
control by giving them accountability of transactions that affect them.
For example, if questions arise about missing source documents,
unrecorded transactions, or a specific transaction, pre-numbered forms
allow tractability through the accounting system. Pre-numbering forms is
as fundamental as recording the date on the source document.

**(2) Date** - One of the key data elements for well-developed
accounting systems is the date. If agency personnel will enter the date
as part of the source document, then agencies can sort individual
transactions according to the date of occurrence, which, in turn, yields
meaningful information for the management of an operation. It also
ensures that transactions are recorded in the appropriate period of
accounting. Recording the date is an essential ingredient of any audit
trail.

**(3) Aircraft Registration Number** - Needed for allocation to the
appropriate aircraft.

**(4) Contract Number** - Needed for allocation to the appropriate
contract, if appropriate

**(5) Account Number** - The various possibilities, such as

> 61112 - Fuel, Bulk (Commercial)
>
> 61115 - Fuel, Retail (Federal)
>
> may be preprinted on the form with an adjacent check off box.

**(6) Gallons Delivered** - Gallons delivered is a key element in the
computation of the total cost of the purchased fuel.

**(7) Total Amount** - Enter the total amount into the proper
transaction journal.

**(8) Signature Block** - The pilot responsible for the aircraft into
which the fuel is pumped should sign here.

**B.2.2 Time Sheet**

**General Comments** - Time sheets or time cards represent the primary
source of labor data for an organization. An organization first must
decide to what level of the organization they want personnel accounting
for their time at a detail level. Normally, direct labor keeps detailed
time sheets, while overhead labor keeps track of time on a more macro
level and subsequently has their time assigned to specific jobs based on
a predetermined allocation basis. Examples of direct labor in a
maintenance organization would include inspectors, mechanics, overhaul
shop personnel, etc. Once an organization decides who will track their
time, then they need to use a form that captures relevant data.

**Important Data Elements to Consider**

**(1) Date** - One of the key data elements for well-developed
accounting systems is the date. If agency personnel will enter the date
as part of the source document, then agencies can sort individual
transactions according to the date of occurrence. This, in turn, yields
meaningful information for the management of an operation and ensures
that transactions are recorded in the appropriate period of accounting.
Recording the date is an essential ingredient of any audit trail.

**(2) Work Order Number** - This is for cross-reference when doing an
audit and helps track cost to a specific project if desired.

**(3) Aircraft Registration Number** - Needed for allocation to the
appropriate aircraft.

**(4) Account Number** - It is essential that direct labor have direct
labor account numbers to which they can charge their time. It is
important to capture the entire amount of paid hours not just productive
hours, therefore a charge should exist for the time paid that is not
directly associated with a job.

**(5) Description of Work Performed** - Allows an organization to
accurately determine the type of work or tasks that various personnel
have performed during a job. An example of a description of work
performed might simply state, \"performance of 100-hour inspection\" or
\"replacement of part number such and such\". Again description of work
gives an organization an audit trail.

**(6) Total Time** - Summarizes the detailed entries of the daily time
sheet and is also the amount entered into the labor journal.

**(7) Signature Block** - The technician whose time is recorded on the
time sheet should sign it here. Again, this is part of building an audit
trail.

**B.2.3 Work Order**

**General Comments** - The work order is the source document that
summarizes the work performed on an aircraft. The work order contains a
lot of data but, most importantly, it summarizes the activity about
parts and labor. When developing or looking for an appropriate form, an
organization might want to consider the following elements.

**Important Data Elements to Consider**

**(1) Pre-Numbered Form** - Pre-numbered forms offer an organization
control by giving them accountability of transactions that affect them.
For example, if questions arise about missing source documents,
unrecorded transactions, or a specific transaction, pre-numbered forms
allow tractability through the accounting system. Pre-numbering forms is
as fundamental as recording the date on the source document.

**(2) Work Order Number -** This provides a cross reference when doing
an audit and helps track costs to a specific project if desired.

**(3) Date** - One of the key data elements for well-developed
accounting systems is the date. If agency personnel will enter the date
as part of the source document, then agencies can sort individual
transactions according to the date of occurrence which, in turn, yields
meaningful information for the management of an operation and ensures
that transactions are recorded in the appropriate period of accounting.
Recording the date is an essential ingredient of any audit trail.

**(4) Aircraft Registration Numbe**r - FAIRS and the Circulars require
an organization to track costs by tail number.

**(5) Contract Number** - Agencies may want to track cost by contract.

**(6) Account Number(s)** - This is necessary to make sure the various
costs are posted to the proper accounts. This task can be simplified by
preprinting the form with the various cost accounts in use (for example:
Airframe Parts - Scheduled #61221 and Airframe Parts - Unscheduled
#61225).

**(7) Labor Hours** - Important ingredient when determining the cost of
total labor.

**(8) Labor Rate** - Important ingredient when determining the cost of
total labor.

**(9) Total Labor Cost** - Sum of the labor hours x labor rate.

**(10) Part Number** - If not for regulatory reasons then for internal
purposes, an organization should indicate the parts that required
attention during the maintenance action.

**(11) Serial Number** - If applicable, record the serial number. This
is an important factor in maintaining air worthiness of the aircraft.

**(12) Nomenclature** - As important as the part number.

**(13) Quantity** - Important ingredient when determining the cost of
parts during maintenance.

**(14) Unit Price** - Important ingredient when determining the cost of
parts during maintenance.

**(15) Extended Cost** - Quantity x Unit Price.

**(16) Signature Block** - The technician who accomplished the work sign
here. Again, this is part of building an audit trail.

**B.2.4 Purchase Order**

**General Comments** - The purchase order is the official document that
reflects what an organization has ordered. A properly-designed purchase
order will allow an organization to determine what is outstanding on a
given date and to compare actual receipts to what was ordered. An
organization should consider the following data elements when
implementing a form for the purchase ordering system.

**Important Data Elements to Consider**

**(1) Pre-Numbered Form** - Pre-numbered forms offer an organization
control by giving them accountability of transactions that affect them.
For example, if questions arise about missing source documents,
unrecorded transactions, or a specific transaction, pre-numbered forms
allow tractability through the accounting system. Pre-numbering forms is
as fundamental as recording the date on the source document.

**(2) Date** - One of the key data elements for well-developed
accounting systems is the date. If agency personnel will enter the date
as part of the source document, then agencies can sort individual
transactions according to the date of occurrence. This in turn, yields
meaningful information for the management of an operation and ensures
that transactions are recorded in the appropriate period of accounting.
Recording the date is an essential ingredient of any audit trail.

**(3) Quantity Ordered** - The receiving department must also verify
that everything ordered has been received.

**(4) Part Number** - When an organization receives the shipment that
fulfills the purchase request, the receiving department will need to
compare the actual part number received with the part number ordered.

**(5) Description** - Another important attribute used during the
receipt of an order. Compare nomenclature of part actually received to
nomenclature on purchase order.

**(6) Unit Price** - Important ingredient when determining the cost of
parts used for maintenance.

**(7) Extended Cost** - Quantity x Unit Price.

**(8) Intended Use** - This is needed to show whether the part(s) were
ordered for inventory or a specific aircraft. If it is ordered for
inventory, account number 15120 is applicable. If the part is ordered
for an aircraft, the aircraft tail number should be shown as a minimum.
In addition, the work order or purchase requisition should be shown to
facilitate an audit.

**(9) Signature Block** - The technician who accomplished the work sign
here. Again, this is part of building an audit trail.

**B.2.5 Aircraft Usage Report**

**General Comments** - The aircraft usage report establishes how a
particular aircraft was used during a particular period of time. This
form combines input from the flight log and the maintenance log and
capture not only flying and block-to-block time but also the overall
availability of the aircraft. An organization should consider the
following data elements when implementing an Aircraft Usage Report form.

**Important Data Elements to Consider**

**(1) Aircraft Registration Number** - Needed for allocation to the
appropriate aircraft.

**(2) Date** - Data must be entered for each day of the week

**(3) Mission Flying Time** or Block-to-block Time - This shows the
total time for the aircraft for this date in support of the agency\'s
mission, which agency project or cost code benefited from each flight,
contracts, etc.. Time should be entered in decimal hours for ease of
addition.

**(4) Waiting Time -** This shows the total waiting time associated with
the time shown in (3).

**(5) Other Flying or Block-to-block Time** - This shows any other time
that was logged on this aircraft for this day. This might include
flight-training time, ferry time or maintenance test flight time. Adding
the times shown in (3) and (5) should match the total time shown in the
aircraft log book for this date.

**(6) In Maintenance** - This shows the total time that the aircraft was
in maintenance for this date.

**(7) Other (Specify)** - This shows the total time that the aircraft
was in use for something other than flight, waiting associated with a
flight, or maintenance. Do not record the time that the aircraft is
available for flight but not in use.

**(8) Contract/Job Number -** Record the contract number or job number
here for any flight that is performed under a contract or specific job
number. The use of the aircraft for public or non-public use can also be
recorded here.

**(9) Comments** - Show what other use the aircraft was put to in this
space. This must be completed if time is shown under (7).

**(10) Reviewed By** - This is the signature of the individual who has
reviewed the entries for the week for correctness.

**(11) Vendor Name and Address -** The aircraft used may be a
commercially procured service.

**(12) Crew Names**

**(13) Pre-Numbered Form -** This is very important for an aircraft use
report as it allows traceability through the systems.

**(14) Aircraft Make and Model**

**(15) Flight Activity -** Flight data such as From/To, number of
passengers, pounds of cargo, etc. This should contain data summarized
from the passenger or cargo manifest.

**(16) Pilot Signatures -** These signatures are just as important as
the "Reviewed By" signature.

**(17) Receiving Agent Signature -** This is needed so the Government
Representative may sign that the services were received. This block must
provide for the person's organization and address.

**Appendix C**

**Reports**

**Appendix C**

**REPORTS AVAILABLE**

The recommended accounting system discussed in this guide will provide
numerous reports. These reports fall into the four broad categories
discussed below.

**C.1 Financial Statements**

These reports are the direct output of the accounting system without any
further manipulation.

\* Balance Sheet - This is the financial statement that shows assets,
liabilities, and owner\'s equity.

\* Income and Expense Statement - This is the financial statement that
shows the income and expenses for the accounting period. This statement
also supports the changes shown in the balance sheet when compared with
the one from the previous accounting period.

\* Cash Flow Statement - This is the statement that shows how the
available cash changed during the accounting period.

**C.2 Government Report Input**

One of the primary objectives of the cost accounting system proposed in
this guide is to provide the accounting data required to prepare
financial statements and to provide the input for the following:

-   OMB cost comparisons (such as those required in Circulars A-76 and
    A-126)

> Both Circulars A-76 and A-126 require input data that can be obtained
> from the accounting system. The CAG Correlation Matrix on page 24A
> provides a cross reference to show which account in the accounting
> system generates the required data. In addition, the detailed account
> descriptions shown in chapter 3.0 indicate the detailed applicability
> of each account to the required cost elements for A-76 and/or A-126
> calculations.

-   FAIRS

> The agency cost accounting system will be the major contributor to the
> quarterly FAIRS reports of aviation use and cost. The CAG Correlation
> Matrix on page \_ provides a cross reference to show which account in
> the accounting system generates the required data. In addition, the
> detailed account descriptions shown in chapter 3 indicate the detailed
> applicability of each account to the matching FAIRS cost elements.

**C.3 U.S. Federal Standard General Ledger System (SGL)**

As discussed in chapter 3, the chart of accounts developed in this guide
is based directly on the SGL. In fact, the two use the same major
account categories and many of the same subsidiary account categories.
Therefore, there is **direct** correlation between the two accounting
systems and data created by the proposed aviation cost accounting system
can be fed directly into the SGL.

**C.4 Object Class/Line Item Accounting**

The Object Class/Line Item system of accounting in use by the Federal
Government uses a different way of classifying costs that is focused on
the purpose of the obligation, rather than the service or product
produced. It uses a series of very broad categories of costs (Object
Classes) that cut across the functional cost allocation categories
needed in a cost accounting system. These object classes are defined in
OMB Circular A-11.

Object Class definition contained in this circular are as follows:

[Personal Services and Benefits]{.underline}

> 11.1 Personnel Compensation - Full time Permanent
>
> 11.3 ,, ,, - Other than Full time permanent
>
> 11.5 ,, ,, - Other personnel compensation
>
> 11.7 ,, ,, - Military personnel
>
> 11.8 ,, ,, - Special personal services
>
> 11.9 ,, ,, - Total
>
> 12.1 Personnel benefits - Civilian personnel
>
> 12.2 ,, ,, - Military personnel
>
> 13.0 Personnel benefits - Former personnel

[Contractual Services and Supplies]{.underline}

> 21.0 Travel and transportation of persons
>
> 22.0 Transportation of things
>
> 23.1 Rental payments to GSA
>
> 23.2 Rental payments to others
>
> 23.3 Communications, utilities and miscellaneous
>
> 24.0 Printing and reproduction
>
> 25.0 Other services
>
> 26.0 Supplies and materials

[Acquisition of Capital Assets]{.underline}

> 31.0 Equipment
>
> 32.0 Land and structures
>
> 33.0 Investments and loans

[Grants and Fixed Charges]{.underline}

> 41.0 Grants subsidies and contributions
>
> 42.0 Insurance claims and indemnities
>
> 43.0 Interest and dividends
>
> 44.0 Refunds

[Other]{.underline}

> 91.0 Unvouchered
>
> 92.0 Undistributed
>
> 93.0 Limitation on expenses
>
> 99.0 Subtotal obligations
>
> 99.9 Total obligations

Page 24B illustrates how the two systems correlate at the object class
level. As can be seen, it is relatively easy to take cost collected by
the cost accounting system and consolidate and assign them to object
classes. It is expected that the costs collected by the cost collection
system can also be allocated to line items by each agency. However,
unless the line item suffixes and/or other suffixes are set up to match
the cost accounting account numbers, it will be very difficult to make a
correlation the other way \-- i.e. from object class/line item to
aviation cost account.

**C.5 Management Reports**

When an accounting system is designed as discussed in this guide, the
standard financial reports as well as custom designed reports can be
easily generated to support management decisions. This is possible
because flexibility has been built into the chart of accounts and
suffixes are used to collect information in detailed categories (i.e.,
aircraft tail number, work order number, and object class code). The way
to ensure desired output can be produced is to define what is needed
prior to constructing the accounting system.

**C.6 Federal Aviation Interactive Reporting System (FAIRS)**

OMB has charged GSA to establish and maintain a statistical database of
Federal agency aircraft use and costs. GSA has developed FAIRS to meet
that mandate and to provide a powerful analysis structure for the
Federal agencies to use in planning, programming, and budgeting for
aircraft use. FAIRS is a centralized statistical database which is
accessed through the Internet (Web). Federal agencies designate certain
authorized individuals to input and retrieve information from FAIRS.
Each person with access to FAIRS must be trained and certified by GSA
for access to the system. Each Federal agency that uses aircraft or
aircraft services in the course of its business must designate an
appropriate number of persons to input and retrieve information in
FAIRS. FAIRS collects several data elements which are not common to cost
accounting systems. These include specific inventory information on each
fleet aircraft, level of activity of each aircraft, mishap data, and
aircraft modification data. The agency aircraft cost accounting system
must extract information elements in strict accordance with the business
rules for reporting to FAIRS and must translate chart-of-account entries
into the appropriate reporting elements for FAIRS. The matrices in
Section 2.4 show a cross-reference of FAIRS data elements and accounting
cost elements. Appendix D provides the definitions of the FAIRS data
elements. Specific assistance is available to any Federal agency
establishing or refining its internal cost accounting methods to support
FAIRS. Contact: GSA, Aircraft Management Policy Division (MTA), 1800 F
St. NW, Washington, DC 20405 (202-208-0519).

**APPENDIX D**

**FAIRS Data Element Definitions**

## Appendix D

## FAIRS Data Elements and Their Definitions

This section lists the FAIRS cost data elements and defines them. See
CAG section 2.1 for discussion of general terms related to Government
aircraft.

  ------------------------------------------------------------------------
        **Data Element**             **Definition**
  ----- ---------------------------- -------------------------------------
  1     Acquisition Date             The date that the acquiring executive
                                     agency took responsibility of the
                                     aircraft, e.g., received title,
                                     signed a lease/purchase agreement,
                                     signed a bailment agreement, accepted
                                     physical transfer, or signed an SF
                                     122.

  2     Acquisition Method           Indicates the acquisition method used
                                     to acquire the aircraft.

  3     Acquisition Primary Mission  Identifies the primary justification
                                     for the bureau/office/service of the
                                     executive agency to acquire the
                                     aircraft.

  4     Acquisition Secondary        Identifies the secondary
        Mission                      justification for the
                                     bureau/office/service of the
                                     executive agency to acquire the
                                     aircraft.

  5     Acquisition Source Type      Describes the type of organization or
                                     source from which the aircraft was
                                     acquired.

  6     Acquisition Value            The value initially recorded on
                                     agency property records and/or
                                     accounting records at the time of
                                     acquisition. If the aircraft is
                                     acquired through an interagency
                                     transfer, the acquisition value is
                                     the greater of the aircraft net book
                                     value plus the cost of returning the
                                     aircraft to an airworthy condition or
                                     the commercial retail value of that
                                     aircraft in average condition. If it
                                     is a military aircraft without a
                                     commercial equivalent in an airworthy
                                     condition, the acquisition value is
                                     equal to the scrap value. If not in
                                     airworthy condition, the acquisition
                                     value is equal to the scrap value
                                     plus the cost of returning the
                                     aircraft to an airworthy condition.
                                     Subsequent modifications made to the
                                     airframe are not part of the
                                     acquisition value. [This is a
                                     MISCELLANEOUS COST.]{.underline}

  7     Actual Cost Indicator        Indicates whether the data associated
                                     with the Fleet Aircraft costs being
                                     reported are actual cost versus
                                     estimated cost.

  8     Administrative Overhead Cost Severable or allocable costs that do
                                     not relate directly to the operation
                                     of the agency\'s aircraft, but are
                                     necessary for the conduct of aircraft
                                     operations. Examples include payroll
                                     and personnel office costs in support
                                     of the aviation program. Report costs
                                     at the operations level and one tier
                                     above. Test: Costs are included in
                                     this category only if they would not
                                     continue to exist if the agency
                                     disposed of its aircraft. In other
                                     words, if you got rid of your
                                     aircraft, and the cost still existed,
                                     it is a programmatic cost and not an
                                     administrative overhead cost for this
                                     report. Administrative overhead may
                                     be allocated to an aircraft cost only
                                     where a direct connection between the
                                     administrative function and the
                                     aircraft can be shown. Otherwise, the
                                     administrative cost is a programmatic
                                     cost and is not reportable in FAIRS.
                                     [This is a FIXED COST.]{.underline}

  9     Agreement Begin Date         Date on which the type of service
                                     that includes use of charter
                                     aircraft, contract aircraft, rental
                                     aircraft, and related activities in
                                     support of an executive agency,
                                     starts.

  10    Agreement Comment            Relevant remarks which add
                                     clarifications to the aircraft CAS
                                     Cost and Hours Flown information.

  11    Agreement End Date           Date on which the type of service
                                     that includes use of charter
                                     aircraft, contract aircraft, rental
                                     aircraft, and related activities in
                                     support of an executive agency, ends.

  12    Agreement Number             Reference number for the type of
                                     service that includes use of charter
                                     aircraft, contract aircraft, rental
                                     aircraft, and related activities in
                                     support of an executive agency.

  13    Agreement Type               Indicates the type of commercial
                                     aviation service in support of an
                                     executive agency.

  14    Aircraft Comment             Relevant remarks that clarify the
                                     Fleet aircraft inventory information.

  15    Allow Secure Aircraft        Indicates whether the
        Indicator                    bureau/office/service is allowed to
                                     have mission-sensitive aircraft in
                                     its inventory.

  16    Block-to-Block Time          Total elapsed flight time, expressed
                                     in hours and tenths of an hour,
                                     calculated from the time the aircraft
                                     begins to move under its own power
                                     until it comes to a rest and shuts
                                     down after completion of the flight.
                                     Used for recording crewmember flight
                                     time. Optional use at the agency\'s
                                     discretion.

  17    Bureau/Office/Service        Identifies the reporting subunit
                                     within the executive agency. Usually
                                     the first major subunit of the agency
                                     but may be a lower level unit at the
                                     agency\'s discretion.

  18    Can Report for Others        Indicates whether the
        Indicator                    bureau/office/service is allowed to
                                     report CAS cost and hours flown for
                                     another bureau/office/service.

  19    Certificate of Airworthiness Indicates the class of airworthiness
        Class for Type \"Special\"   for an aircraft holding a Certificate
                                     of Airworthiness of type \"Special\".
                                     See 14 CFR 21.

  20    Certificate of Airworthiness Indicates the class of airworthiness
        Class for Type \"Standard\"  for an aircraft holding a Certificate
                                     of Airworthiness of type
                                     \"Standard\". See 14 CFR 21.

  21    Certificate of Airworthiness Indicates the type of Certificate of
        Type                         Airworthiness held by the aircraft.

  22    Cost Comment                 Relevant remarks that clarify the
                                     cost reporting.

  23    Cost Offset - Commercial     Funds, or the value of
        Cost                         resources-in-kind, contributed from
                                     outside your agency by a commercial
                                     source to share the costs of this
                                     aircraft operation. Contributions by
                                     non-Federal Government agencies are
                                     classed as commercial cost offsets.
                                     Examples include the supply of fuel,
                                     dollars, crewmembers, hangaring or
                                     other materials donated by outside
                                     entities towards the expense or
                                     operation of the aircraft.

  24    Cost Offset - Federal Cost   Funds, or the value of
                                     resources-in-kind, contributed from
                                     outside your agency by a Federal
                                     source to share the costs of this
                                     aircraft operation. Contributions by
                                     Federal Government agencies are
                                     classed as Federal cost offsets.
                                     Examples include the supply of fuel,
                                     dollars, crewmembers, hangaring or
                                     other materials donated by Federal
                                     Government agencies towards the
                                     expense or operation of the aircraft.

  25    Cost Reporting Exemption     Indicates whether the agency/bureau
        Indicator                    is exempt from reporting costs
                                     associated with a specific aircraft
                                     in the fleet.

  26    Cost This Period Indicator   Indicates that the agency/bureau has
                                     incurred costs for the reporting
                                     period for the aircraft.

  27    Data Availability Status     Indicates the availability of the
                                     data. Its purpose is to allow the
                                     agency's designated reviewing
                                     official to review the data in the
                                     FAIRS database prior to using the
                                     data in reporting.

  28    Data Quarters Allowed        Represents the number of calendar
                                     quarters for which an agency/bureau
                                     is allowed to report data.

  29    Disposal Date                The date that the disposing executive
                                     agency relinquishes responsibility
                                     for an aircraft, (a) the date the
                                     executive agency transfers title in
                                     the case of a sale or exchange,
                                     returns the aircraft to the lessor or
                                     bailor, declassifies it, or otherwise
                                     disposes of the aircraft, or (b) the
                                     date that the accepting party signs
                                     the SF122 or SF123 in the case of
                                     transferred or surplus aircraft.

  30    Disposal Method              Indicates the transaction method used
                                     to dispose of the aircraft.

  31    Disposal Recipient           Indicates the name of the
                                     organization, company, or individual
                                     that is accepting title to the
                                     aircraft from the owning agency.

  32    Disposal Recipient Type      Identifies the type of recipient that
                                     is accepting title to the aircraft
                                     from the owning agency.

  33    Executive Agency             Identifies any executive department
                                     or independent establishment in the
                                     executive branch of the Government,
                                     including any wholly-owned Government
                                     corporation.

  34    Fixed Crew - Commercial Cost Crew costs which do not vary
                                     according to aircraft usage, paid to
                                     a commercial source. This includes
                                     flight crew salaries, benefits and
                                     training costs for contractor crews.
                                     If any person in this descriptive
                                     category performs other duties on a
                                     part-time basis which are not flight
                                     crew duties, allocate that portion of
                                     the costs related only to flight crew
                                     duties. Include standby time as crew
                                     cost. Example: Physical Scientist
                                     Contract employee performs flight
                                     crew duties 25% of the time and acts
                                     as Senior Advisor for Science for the
                                     balance of the time. Allocate 25% of
                                     cost to this category and disregard
                                     the balance. [This is a FIXED
                                     COST.]{.underline}

  35    Fixed Crew - Federal Cost    Crew costs which do not vary
                                     according to aircraft usage, paid to
                                     a Federal source. This includes
                                     flight crew salaries, benefits and
                                     training costs for Federal employee
                                     crews. If any person in this
                                     descriptive category performs other
                                     duties on a part-time basis which are
                                     not flight crew duties, allocate that
                                     portion of the costs related only to
                                     flight crew duties. Include standby
                                     time as crew cost. Example: Aviation
                                     Program Manager performs flight crew
                                     duties 25% of the time. Allocate 25%
                                     of costs to this category and the
                                     balance to Operations Overhead. [This
                                     is a FIXED COST.]{.underline}

  36    Fixed Lease - Commercial     The portion of lease costs paid to a
        Cost                         commercial source that are based on
                                     the time the aircraft is available to
                                     the agency, but not those costs
                                     associated with flight time. If the
                                     agreement is a lease/purchase and a
                                     portion of the payments is being
                                     accrued to equity in the aircraft,
                                     include the entire amount in this
                                     category. Example: Your
                                     lease/purchase agreement requires
                                     \$70,000 per month plus \$2,000 per
                                     flying hour. A variable portion of
                                     the \$70,000 is allocated toward your
                                     equity in the ownership of the
                                     aircraft. Report \$70,000 per month
                                     to FAIRS. The flying hour portion is
                                     reported under Variable Lease -
                                     Commercial Cost. [This is a FIXED
                                     COST]{.underline}.

  37    Fixed Lease - Federal Cost   The portion of lease costs paid to a
                                     Federal source that are based on the
                                     time the aircraft is available to the
                                     agency, but not those costs
                                     associated with flight time. If the
                                     agreement is a lease/purchase and a
                                     portion of the payments is being
                                     accrued to equity in the aircraft,
                                     include the entire amount in this
                                     category. Example: Your
                                     lease/purchase agreement requires
                                     \$70,000 per month plus \$2,000 per
                                     flying hour. A variable portion of
                                     the \$70,000 is allocated toward your
                                     equity in the ownership of the
                                     aircraft. Report \$70,000 per month
                                     to FAIRS. The flying hour portion is
                                     reported under Variable Lease -
                                     Federal Cost. [This is a FIXED
                                     COST.]{.underline}

  38    Flight Support - Commercial  Cost of landing, tiedown, parking,
        Cost                         hangaring, and ground handling, away
                                     from home station; air traffic
                                     control fees, flight planning,
                                     clearances, etc., paid to a
                                     commercial or non-Federal source.
                                     [This is a VARIABLE
                                     COST.]{.underline}

  39    Flight Support - Federal     Cost of landing, tiedown, parking,
        Cost                         hangaring, and ground handling, away
                                     from home station; air traffic
                                     control fees, flight planning,
                                     clearances, etc., paid to a Federal
                                     source. [This is a VARIABLE
                                     COST.]{.underline}

  40    Fuel - Commercial Cost       Cost of fuel expended in the
                                     operation of the aircraft, paid to a
                                     commercial source. This includes fuel
                                     injection fluids such as deionized
                                     water, water methanol and Prist.
                                     [This is a VARIABLE COST]{.underline}

  41    Fuel - Federal Cost          Cost of fuel expended in the
                                     operation of the aircraft, paid to a
                                     Federal source. This includes fuel
                                     injection fluids such as deionized
                                     water, water methanol and Prist.
                                     [This is a VARIABLE COST]{.underline}

  42    Ground Servicing -           Costs associated with towing,
        Commercial Cost              cleaning, air conditioning, start
                                     service, etc., away from home
                                     station, paid to a commercial source.
                                     [This is a VARIABLE
                                     COST.]{.underline}

  43    Ground Servicing - Federal   Costs associated with towing,
        Cost                         cleaning, air conditioning, start
                                     service, etc., away from home
                                     station, paid to a Federal source.
                                     [This is a VARIABLE
                                     COST]{.underline}.

  44    Home Base City Name          Identifies the city from which the
                                     aircraft is normally operated and/or
                                     scheduled.

  45    Home Base Foreign Location   Identifies the foreign location from
                                     which the aircraft is normally
                                     operated and/or scheduled, outside of
                                     the United States and its
                                     territories.

  46    Home Base State Abbreviation Identifies the two-character state
                                     code from which the aircraft is
                                     normally operated and/or scheduled.

  47    Home Base Zip Code           Identifies the zip code of the
                                     location from which the aircraft is
                                     normally operated and/or scheduled.

  48    Hours Flown                  The amount of time, expressed in
                                     hours and tenths of an hour, from
                                     when the aircraft leaves the ground
                                     until the time it touches down again.

  49    Hours This Period Indicator  Indicates whether the agency/bureau
                                     has hours flown for the reporting
                                     period for the aircraft.

  50    In-House Cost                Operating expenses provided by the
                                     using Government agency that benefits
                                     from the commercial service, such as
                                     pilot and fuel expenses. For ISSA
                                     agreement, in addition to reporting
                                     the in-house costs, the benefiting
                                     (operating) agency/bureau must report
                                     all costs (fuel, crew, etc.) incurred
                                     to the owning agency/bureau that, in
                                     turn, will report these costs to
                                     FAIRS.

  51    Include in Aircraft Totals   Indicates whether a specific cost for
        Indicator                    a Fleet Aircraft is to be included in
                                     the totals pertaining to the
                                     aircraft.

  52    Insurance Premium Cost       Cost of premiums for commercial
                                     insurance policies for liability or
                                     hull damage. It does not include
                                     self-insurance costs. [This is a
                                     FIXED COST.]{.underline}

  53    ISSA Vendor Agency           Identifies any executive department
                                     or independent establishment in the
                                     executive branch of the Government,
                                     including any wholly owned Government
                                     corporation, which is providing the
                                     service, i.e., the ISSA provider
                                     (Federal).

  54    ISSA Vendor                  Identifies the reporting subunit
        Bureau/Office/Service        within the executive agency, i.e.,
                                     the ISSA provider.

  55    Litigation Settlement Cost   Cost to settle litigation against the
                                     Federal Government resulting from
                                     tort claims and that are a direct
                                     result of aircraft operation
                                     (aircraft in motion). Costs are
                                     reported in the year paid and are not
                                     allocated to other aircraft. [This is
                                     a FIXED COST.]{.underline}

  56    Lubricant - Commercial Cost  Cost of lubricants, hydraulic oils,
                                     and similar expendable fluids not
                                     including those quantities which are
                                     changed at regular maintenance
                                     intervals, paid to a commercial
                                     source. [This is a VARIABLE
                                     COST.]{.underline}

  57    Lubricant - Federal Cost     Cost of lubricants, hydraulic oils,
                                     and similar expendable fluids not
                                     including those quantities which are
                                     changed at regular maintenance
                                     intervals, paid to a Federal source.
                                     [This is a VARIABLE
                                     COST.]{.underline}

  58    Manufacturer                 Identifies the original manufacturer
                                     of the aircraft as designated on the
                                     aircraft dataplate.

  59    Mission                      Represents the principal purpose for
                                     which the aircraft was dispatched.
                                     One mission may be designated per
                                     sortie (one take off and landing).

  60    Mission Sensitive Indicator  Indicates whether the data associated
                                     with the aircraft is protected.

  61    Model                        Identifies the model of the aircraft
                                     as designated on the aircraft
                                     dataplate.

  62    Modification - Cost          Identifies the dollar value of the
                                     permanent modification made to the
                                     airframe of the aircraft. This
                                     excludes modifications needed to make
                                     the aircraft airworthy and special
                                     mission equipment not part of the
                                     airframe. [This is a MISCELLANEOUS
                                     COST.]{.underline}

  63    Modification - Description   Describes the permanent modification
                                     made to the airframe, engine,
                                     propeller, or appliances of the
                                     aircraft. This excludes modifications
                                     needed to make the aircraft airworthy
                                     and special mission equipment not
                                     part of the airframe.

  64    Operational Category         Describes the current status of the
                                     aircraft.

  65    Operations Overhead Cost     Severable or allocable costs of
                                     support functions, which are directly
                                     related to the ownership or operation
                                     of the aircraft. Examples include the
                                     costs of aviation program managers,
                                     flight dispatchers, and allocable
                                     costs of physical facilities and
                                     equipment in support of the aircraft.
                                     Report costs at the operations level
                                     and one tier above. Test: Costs are
                                     included in this category only if
                                     they would not continue to exist if
                                     the agency disposed of its aircraft.
                                     In other words, if you got rid of
                                     your aircraft, and the cost still
                                     existed, it is a programmatic cost
                                     and not an operations overhead cost
                                     for this report. Operations overhead
                                     may be allocated to an aircraft cost
                                     only where a direct connection
                                     between the operations function and
                                     the aircraft can be shown. Otherwise
                                     the operations cost is a programmatic
                                     cost and is not reportable in FAIRS.
                                     [This is a FIXED COST.]{.underline}

  66    Other Commercial Costs       Any aircraft cost paid to a
                                     commercial source that does not meet
                                     any other cost element definition.
                                     [This is a VARIABLE
                                     COST.]{.underline}

  67    Other Federal Costs          Any aircraft cost paid to a Federal
                                     source that does not meet any other
                                     cost element definition. [This is a
                                     VARIABLE COST.]{.underline}

  68    Ownership Category           Indicates the aircraft ownership.

  69    Oxygen - Commercial Cost     Cost of servicing breathing oxygen
                                     systems, paid to a commercial source.
                                     [This is a VARIABLE
                                     COST.]{.underline}

  70    Oxygen - Federal Cost        Cost of servicing breathing oxygen
                                     systems, paid to a Federal source.
                                     [This is a VARIABLE
                                     COST.]{.underline}

  71    Paid-Out Cost                Operating expenses paid out to
                                     commercial or other Government agency
                                     providers of the CAS. Paid-out costs
                                     include operations and administrative
                                     overhead costs allocated to the CAS.

  72    Post Disposal Quarters       Represents the number of calendar
        Allowed                      quarters for which an agency/bureau
                                     is allowed to report data for a
                                     disposed aircraft after its disposal.

  73    Registration Mark            Identifies the unique identification
                                     mark\--usually numbers and
                                     letters\--displayed on Government
                                     aircraft (including foreign aircraft
                                     hired as CAS). \"Tail number\" is
                                     commonly used for \"registration
                                     mark\".

  74    Report Period Begin Date     Beginning date of the period for
                                     which the CAS or Fleet Aircraft cost
                                     and hours flown data are submitted.
                                     This is the date for which agency
                                     costs begin to accrue, regardless of
                                     ownership or other agency use.

  75    Report Period End Date       Ending date of the period for which
                                     the CAS or Fleet Aircraft cost and
                                     hours flown data are submitted. This
                                     is the date for which agency costs
                                     cease to accrue, regardless of when
                                     paid or disbursed.

  76    Reporting Identifier         Represents the number that, in
                                     combination with the make and model,
                                     uniquely identifies the aircraft and
                                     is used for reporting purposes.
                                     Normally this number will be the
                                     serial number, but for a
                                     mission-sensitive aircraft it is the
                                     number assigned by the agency owning
                                     the aircraft in order to protect the
                                     identity of the aircraft.

  77    Scheduled Calendar           Cost of all labor expended by
        Maintenance Labor --         mechanics and inspectors associated
        Commercial Cost              with maintenance scheduled on a
                                     calendar basis paid to a commercial
                                     source. Report maintenance labor
                                     costs which are severable from other
                                     costs or which result from agreements
                                     where the contractor provides only
                                     labor and the Government provides
                                     parts. [This is a FIXED
                                     COST.]{.underline}

  78    Scheduled Calendar           Cost of all labor expended by
        Maintenance Labor -- Federal mechanics and inspectors associated
        Cost                         with maintenance scheduled on a
                                     calendar basis paid to a Federal
                                     source. Report maintenance labor
                                     costs which are severable from other
                                     costs or which result from agreements
                                     where another Federal Executive
                                     agency provides only labor and your
                                     Federal Executive agency provides
                                     parts. [This is a FIXED
                                     COST]{.underline}.

  79    Scheduled Calendar           Cost of all parts and consumables
        Maintenance Parts --         used for maintenance scheduled on a
        Commercial Cost              calendar basis paid to a commercial
                                     source. [This is a FIXED
                                     COST.]{.underline}

  80    Scheduled Calendar           Cost of all parts and consumables
        Maintenance Parts -- Federal used for maintenance scheduled on a
        Cost                         calendar basis paid to a Federal
                                     source. [This is a FIXED
                                     COST.]{.underline}

  81    Scheduled Calendar           Cost of contracts for maintenance or
        Maintenance Contract Out --  inspection scheduled on a calendar
        Commercial Cost              basis paid to a commercial source.
                                     This may include full service
                                     contracts, which include parts and
                                     labor costs. If contract labor is
                                     reported here, do not report it under
                                     Maintenance Labor - Commercial Cost.
                                     [This]{.underline} is a [FIXED
                                     COST.]{.underline}

  82    Scheduled Calendar           Cost of contracts for maintenance or
        Maintenance Contract Out --  inspection scheduled on a calendar
        Federal Cost                 basis paid to a Federal source. This
                                     may include full service contracts or
                                     agreements, which include parts and
                                     labor costs. If contract labor is
                                     reported here, do not report it under
                                     Maintenance Labor - Federal Cost.
                                     [This is a FIXED COST.]{.underline}

  83    Scheduled Maintenance        Contracted cost for maintenance
        Contract Out - Commercial    scheduled on a flying hour basis or
        Cost                         based on the condition of the part or
                                     component, paid to a commercial
                                     source. This includes inspections,
                                     repairs, Power-by-the-Hour
                                     agreements, and at the agency\'s
                                     option may include all roll-up
                                     maintenance costs incurred against
                                     the aircraft and paid to a commercial
                                     source. This does not include
                                     Unscheduled Maintenance costs and
                                     Refurbishment Costs that are reported
                                     elsewhere. [This is a VARIABLE
                                     COST.]{.underline}

        (Note: see elements 106 and  
        107 for definitions of       
        "Scheduled Maintenance       
        (Calendar) Refurbishment --  
        Commercial Cost and Federal  
        Cost.")                      

  84    Scheduled Maintenance        Contracted cost for maintenance
        Contract Out - Federal Cost  scheduled on a flying hour basis or
                                     based on the condition of the part or
                                     component, paid to a Federal source.
                                     This includes inspections, repairs,
                                     Power-by-the-Hour agreements, and at
                                     the agency\'s option may include all
                                     roll-up maintenance costs incurred
                                     against the aircraft and paid to a
                                     Federal source. This does not include
                                     Unscheduled Maintenance costs and
                                     Refurbishment Costs that are reported
                                     elsewhere. [This is a VARIABLE
                                     COST.]{.underline}

  85    Scheduled Maintenance Engine Cost of parts and labor for scheduled
        Overhaul - Commercial Cost   engine overhaul or rebuild, or Time
                                     Between Overhaul (TBO) replacement,
                                     paid to a commercial source. If the
                                     engine is operated on a
                                     Power-by-the-Hour or similar program,
                                     all engine maintenance costs are
                                     captured in the \"Scheduled
                                     Maintenance Contract Out - Commercial
                                     Cost\" category. [This is a VARIABLE
                                     COST.]{.underline}

  86    Scheduled Maintenance Engine Cost of parts and labor for scheduled
        Overhaul - Federal Cost      engine overhaul or rebuild, or Time
                                     Between Overhaul (TBO) replacement,
                                     paid to a Federal source. If the
                                     engine is operated on a
                                     Power-by-the-Hour or similar program,
                                     all engine maintenance costs are
                                     captured in the \"Scheduled
                                     Maintenance Contract Out - Federal
                                     Cost\" category. [This is a VARIABLE
                                     COST.]{.underline}

  87    Scheduled Maintenance        Cost of scheduled labor expended by
        Labor - Commercial Cost      mechanics, technicians and
                                     inspectors, for scheduled maintenance
                                     based on aircraft usage, paid to a
                                     commercial source. This does not
                                     include labor for engine overhaul or
                                     aircraft refurbishment. [This is a
                                     VARIABLE COST.]{.underline}

  88    Scheduled Maintenance        Cost of scheduled labor expended by
        Labor - Federal Cost         mechanics, technicians and
                                     inspectors, for scheduled maintenance
                                     based on aircraft usage, paid to a
                                     Federal source. This does not include
                                     labor for engine overhaul or aircraft
                                     refurbishment. [This is a VARIABLE
                                     COST.]{.underline}

  89    Scheduled Maintenance        Cost of parts and consumables used
        Parts - Commercial Cost      for maintenance scheduled on a flying
                                     hour or cycle time basis paid to a
                                     commercial source. This does not
                                     include the cost of parts for engine
                                     overhaul or aircraft refurbishment.
                                     [This is a VARIABLE
                                     COST]{.underline}.

  90    Scheduled Maintenance        Cost of parts and consumables used
        Parts - Federal Cost         for maintenance scheduled on a flying
                                     hour or cycle time basis paid to a
                                     Federal source. This does not include
                                     the cost of parts for engine overhaul
                                     or aircraft refurbishment. [This is a
                                     VARIABLE COST.]{.underline}

  91    Scheduled Maintenance        Material and labor costs, scheduled
        Refurbishment - Commercial   on a flying hour basis or
        Cost                         on-condition, for restoring or
                                     upgrading appearance and operational
                                     items such as paint, cabin interiors,
                                     upholstery, or avionics, paid to a
                                     commercial source. This does not
                                     include engines or other major
                                     components. [This is VARIABLE
                                     COST.]{.underline} (See Element #106
                                     below.)

  92    Scheduled Maintenance        Material and labor costs, scheduled
        Refurbishment - Federal Cost on a flying hour basis or
                                     on-condition, for restoring or
                                     upgrading appearance and operational
                                     items such as paint, cabin interiors,
                                     upholstery, or avionics, paid to a
                                     Federal source. This does not include
                                     engines or other major components.
                                     [This is VARIABLE COST]{.underline}.
                                     (See Element #107 below.)

  93    Scheduled Maintenance TBO    Material and labor costs for
        Components - Commercial Cost removing, repairing, overhauling,
                                     replacing, and reinstalling finite
                                     life components that have reached
                                     their published life limits, paid to
                                     a commercial source. This does not
                                     include engines and engine
                                     accessories. [This is a VARIABLE
                                     COST.]{.underline}

  94    Scheduled Maintenance TBO    Material and labor costs for
        Components - Federal Cost    removing, repairing, overhauling,
                                     replacing, and reinstalling finite
                                     life components that have reached
                                     their published life limits, paid to
                                     a Federal source. This does not
                                     include engines and engine
                                     accessories. [This is a VARIABLE
                                     COST.]{.underline}

  95    Secure Aircraft Allowed      Indicates whether the
        Indicator                    bureau/office/service can specify
                                     that one of its aircraft is a secure
                                     aircraft.

  96    Serial Number                Identifies the serial number assigned
                                     to the aircraft by the original
                                     equipment manufacturer as designated
                                     on the aircraft dataplate.

  97    Unscheduled Maintenance and  Costs of labor, travel, per diem and
        Repairs Labor - Commercial   miscellaneous personnel expenses for
        Cost                         unscheduled maintenance and repair
                                     expended by mechanics, technicians,
                                     and inspectors, paid to a commercial
                                     source. This includes costs of
                                     Airworthiness Directives (AD\'s) and
                                     Service Bulletins (SB\'s). [This is a
                                     VARIABLE COST.]{.underline}

  98    Unscheduled Maintenance and  Costs of labor, travel, per diem and
        Repairs Labor - Federal Cost miscellaneous personnel expenses for
                                     unscheduled maintenance and repair
                                     expended by mechanics, technicians,
                                     and inspectors, paid to a Federal
                                     source. This includes costs of
                                     Airworthiness Directives (AD\'s) and
                                     Service Bulletins (SB\'s). [This is a
                                     VARIABLE COST.]{.underline}

  99    Unscheduled Maintenance and  Costs of parts and materials used for
        Repairs Parts - Commercial   unscheduled maintenance, paid to a
        Cost                         commercial source. This includes the
                                     costs of repairing or replacing Time
                                     Between Overhaul (TBO) components
                                     that have failed prior to life
                                     limits. This also includes the costs
                                     of Airworthiness Directives (AD\'s)
                                     and Service Bulletins (SB\'s). [This
                                     is a VARIABLE COST.]{.underline}

  100   Unscheduled Maintenance and  Costs of parts and materials used for
        Repairs Parts - Federal Cost unscheduled maintenance, paid to a
                                     Federal source. This includes the
                                     costs of repairing or replacing Time
                                     Between Overhaul (TBO) components
                                     that have failed prior to life
                                     limits. This also includes the costs
                                     of Airworthiness Directives (AD\'s)
                                     and Service Bulletins (SB\'s). [This
                                     is a VARIABLE COST.]{.underline}

  101   Variable Crew - Commercial   Flight crew costs that vary according
        Cost                         to aircraft usage such as travel and
                                     per diem expenses, overtime pay,
                                     part-time pay, etc., paid to a
                                     commercial source. This does not
                                     include labor costs for unscheduled
                                     maintenance. [This is a VARIABLE
                                     COST.]{.underline}

  102   Variable Crew - Federal Cost Flight crew costs that vary according
                                     to aircraft usage such as travel and
                                     per diem expenses, overtime pay,
                                     part-time pay, etc., paid to a
                                     Federal source. This includes labor
                                     costs for temporary and
                                     When-Actually-Employed (WAE)
                                     employees. This does not include
                                     labor costs for unscheduled
                                     maintenance. [This is a VARIABLE
                                     COST.]{.underline}

  103   Variable Lease - Commercial  Component of aircraft lease costs
        Cost                         based on flying hours or other usage
                                     criteria, paid to a commercial
                                     source. [This is a VARIABLE
                                     COST.]{.underline} For clarification,
                                     please see the applicable parts of
                                     "fixed lease."

  104   Variable Lease - Federal     Component of aircraft lease costs
        Cost                         based on flying hours or other usage
                                     criteria, paid to a Federal source.
                                     [This is a VARIABLE
                                     COST.]{.underline} For clarification,
                                     please see the applicable parts of
                                     "fixed lease."

  105   Year Manufactured            Indicates the year the aircraft was
                                     manufactured, as designated on the
                                     aircraft dataplate.

  106   Scheduled Maintenance        Material and labor costs, scheduled
        (Calendar) Refurbishment -   on a calendar basis, for restoring or
        Commercial Cost              upgrading appearance and operational
                                     items such as paint, cabin interiors,
                                     upholstery, or avionics, paid to a
                                     commercial source. This does not
                                     include engines or other major
                                     components. [This is FIXED
                                     COST.]{.underline}

  107   Scheduled Maintenance        Material and labor costs, scheduled
        (Calendar) Refurbishment -   on a calendar basis, for restoring or
        Federal Cost                 upgrading appearance and operational
                                     items such as paint, cabin interiors,
                                     upholstery, or avionics, paid to a
                                     Federal source. This does not include
                                     engines or other major components.
                                     [This is FIXED COST]{.underline}
  ------------------------------------------------------------------------

**APPENDIX E**

**OMB Circular A-126 Cost Element Definitions**

## Appendix E

## 

## ATTACHMENT B Circular No. A-126

## STANDARD AIRCRAFT PROGRAM COST ELEMENT DEFINITIONS

**NOTE: The complete text of OMB Circular A-126 and its attachments may
be found at
[www.whitehouse.gov/omb/circulars](http://www.whitehouse.gov/omb/circulars)**

**VARIABLE COSTS**

The variable costs of operating aircraft are those costs that vary
depending on how much the aircraft

are used. The specific variable cost elements include:

**Crew costs - variable** - The crew costs which vary according to
aircraft usage consist of travel

expenses (particularly reimbursement of subsistence (i.e., per diem and
miscellaneous expenses),

overtime charges, and wages of crew members hired on an hourly or
part-time basis.

**Maintenance costs - variable** - Unscheduled maintenance and
maintenance scheduled on the basis

of flying time vary with aircraft usage and, therefore, the associated
costs are considered variable

costs. In addition to the costs of normal maintenance activities,
variable maintenance costs shall

include aircraft refurbishment, such as painting and interior
restora-tion, and costs of or allowances for

performing overhauls and modifications required by service bulletins and
airworthiness directives. If

they wish, agencies may consider all of their maintenance costs as
variable costs and account for them

accordingly. Otherwise, certain maintenance costs will be considered
fixed as described in a

subsequent paragraph. Variable maintenance costs include the costs of:

**Maintenance labor - variable** - This includes all labor (i.e.,
salaries and wages, benefits, travel, and

training) expended by mechanics, technicians, and inspectors, exclusive
of labor for engine overhaul,

aircraft refurbishment, and/or repair of major components.

**Maintenance parts - variable** - This includes cost of materials and
parts consumed in aircraft

maintenance and inspections, exclusive of materials and parts for engine
overhaul, aircraft

refurbishment, and/or repair of major components.

**Maintenance contracts - variable** - This includes all contracted
costs for unscheduled maintenance

and for maintenance scheduled on a flying hour basis or based on the
condition of the part or

component.

**Engine overhaul, aircraft refurbishment, and major component
repairs** - These are the

materials and labor costs of overhauling engines, refurbishing aircraft,
and/or repairing major aircraft

components.

NOTE 1: In general, the flying hour cost is computed by dividing the
costs for a period by the

projected hours flown during the period. However, when computing the
flying hour cost factor for this

cost category, divide the total estimated cost for the activities in
this category (e.g., overhaul,

refurbishment and major repairs) by the number of hours flown between
these activities.

NOTE 2: Separate cost or reserve accounts for engine overhaul, aircraft
refurbishment, major

component repairs, and other maintenance cost elements, may, at the
agency\'s discretion, be identified

and quantified separately for mission-pertinent information purposes.
Reserve accounts are generally

used when the aircraft program is funded through a working capital or
revolving fund.

**Fuel and other fluids** - The costs of the aviation gasoline, jet
fuel, and other fluids (eg. engine oil,

hydraulic fluids and water-methanol) consumed by aircraft.

**Lease costs - variable** - When the cost of leasing an aircraft is
based on hours flown , the associated

lease or rental costs are considered variable costs.

**Landing and tie down fees** - Landing fees and tie down fees
associated with aircraft usage are

considered variable costs. Tie down fees for storing an aircraft at its
base of operations should be

considered part of operations overhead, a fixed cost.

##  FIXED COSTS

The fixed costs of operating aircraft are those that result from owning
and support the aircraft and that

do not vary according to aircraft usage. The specific fixed cost
elements include:

**Crew costs - fixed** - The crew costs which do not vary according to
aircraft usage consist of

salaries, benefits, and training costs. This includes the salaries,
benefits, and training costs of crew

members who also perform minimal aircraft maintenance. Also included in
fixed crew costs are the

costs of their charts, personal protective equipment, uniforms, and
other personal equipment.

**Maintenance costs - fixed** - This cost category includes certain
maintenance and inspection

activities which are scheduled on a calendar interval basis and take
place regardless of whether or

how much the aircraft are flown. Agencies are encouraged to simplify
their accounting systems and

account for all maintenance costs as variable costs. However, if they
wish, agencies may account for

the following costs as fixed costs:

**Maintenance labor - fixed** - This includes all projected labor
expended by mechanics and

inspectors associated with maintenance scheduled on a calendar interval
basis. This does not include

variable maintenance labor or work on items having a TBO or retirement
life.

This category also includes costs associated with unallocated
maintenance labor expenses, i.e.,

associated salaries, benefits, travel expenses and training costs. These
costs should be evenly

allocated over the number of the aircraft in the fleet.

**Maintenance parts - fixed** - This includes all parts and consumables
used for maintenance

scheduled on a calendar basis.

**Maintenance contracts - fixed** - This includes all contracted costs
for maintenance or inspections

scheduled on a calendar basis.

**Lease costs - fixed** - When the cost of leasing an aircraft is based
on a length of time (e.g., days,

weeks, months, or years) and does not vary according to aircraft usage,
the associated leased costs

are considered fixed costs.

**Operations overhead** - These include all costs, not accounted for
elsewhere, associated with direct

management and support of the aircraft program. Examples of such costs
include: personnel costs

(salaries, benefits, travel, uniform allowances, training, etc.) for
management and administrative

personnel directly responsible for the aircraft program; building and
ground maintenance; janitorial

services; lease or rent costs for hangars and administrative buildings
and office space; communications

and utilities costs; office supplies and equipment; maintenance and
depreciation of support equipment;

tie down fees for aircraft located on base; and miscellaneous
operational support costs.

**Administrative overhead** - These costs represent a pro-rated share of
salaries, office supplies and

other expenses of fiscal, accounting, personnel, management, and similar
common services performed

outside and the aircraft program but which support this program. For
purposes of recovering the costs

of operations, agencies should exercise their own judgement as to the
extent to which aircraft users

should bear the administrative overhead costs. Agencies may, for
example, decide to charge

non-agency users a higher proportion of administrative overhead than
agency users. For purposes of

A-76 cost comparisons, agencies should compute the actual administrative
costs that would be

avoided if a decision is made to contract out the operation under study.

**Self-insurance costs** - Aviation activity involves risks and
potential casualty losses and liability

claims. Theses risks are normally covered in the private sector by
purchasing and insurance policy.

The government is self insuring; the Treasury\'s General Fund is charged
for casualty losses and/or

liability claims resulting from accidents. For the purposes of analyses,
government managers will

recognize a cost for \"self-insurance\" by developing a cost based on
rates published in OMB Circular

No. A-76.

**Depreciation** - Depreciation represents the cost or value of
ownership. Aircraft have a finite useful

economic or service life. Depreciation is the method used to spread the
cost of the purchase price,

less residual value, over an asset\'s useful life. A-76 provides
guidance on computing depreciation

charges to be used in computing the fixed costs of an aircraft or
aircraft program. Although these

costs are not direct outlays in the sense of most other aircraft costs,
it is important to recognize them

for A-76 cost comparison purposes and when replenishing a working
capital fund by recovering the

full cost of aircraft operations. Depreciation costs depend on aircraft
acquisition or replacement costs,

useful life, and residual or salvage value. To calculate the cost of
depreciation that shall be allocated to

each year, subtract the residual value from the total of the acquisition
cost plus any capital

improvements and, then, divide by the estimated useful life of the
asset.

## OTHER COSTS

There are certain other costs of the aircraft program which should be
recorded but are not

appropriate for inclusion in either the variable or fixed cost
categories for the purposes of justifying

aircraft use or recovering the cost of aircraft operations. These costs
include:

**Accident repair costs** - These costs include all parts, materials,
equipment and maintenance labor

related to repairing accidental damage to airframes or aircraft
equipment. Also included are all

accident investigation costs.

**Aircraft costs** - This is the basic aircraft inventory or asset
account used as the basis for determining

aircraft depreciation charges. These costs include the cost of acquiring
aircraft and accessories,

including transportation and initial installation. Also included are all
costs required to bring aircraft and

capitalized accessories up to fleet standards.

**Cost of Capital** - The cost of capital is the cost to the Government
of acquiring the funds necessary

for capital investments. The agency shall use the borrowing rate
announced by the Department of

Treasury for bonds or notes whose maturities correspond to the useful
life of the asset.

**APPENDIX F**

**OMB Circular A-76 Cost Element Definitions**

Appendix F

Excerpted from Office of Management and Budget (OMB) Circular A-76,
Appendix 6 -- Aviation Competitions:

**The complete text of Appendix 6 and all other parts of Circular A-76
may be found at the following OMB website:
[www.whitehouse.gov/omb/circulars](http://www.whitehouse.gov/omb/circulars)**

E. Standard aviation operation cost elements\--variable

The variable costs of operating aircraft are those costs that vary
depending on how much the

aircraft are used. The specific variable cost elements include:

1\. Fuel and other fluids. These are the costs of aviation gasoline, jet
fuel, and other fluids, e.g.,

engine oil, hydraulic fluids, and water-methanol, consumed by aircraft.
Fuel costs are the cost

per gallon times gallons per hour. Engine oil and other lubricants can
be estimated using

manufacturers\' estimates or on the basis of an historic percentage of
engine fuel cost per hour.

2\. Crew. The crew costs that vary according to aircraft usage consist
of travel expenses,

particularly reimbursement of subsistence, i.e., per diem and
miscellaneous expenses, overtime

charges, and wages plus benefits of crew members hired on an hourly or
part-time basis.

3\. Aircraft lease or rental. When aircraft are obtained under an
open-ended arrangement, such

as an on-call (hourly/availability rate) basis, the associated lease or
rental costs are considered

variable costs.

4\. Landing and tie down fees (if applicable). Landing and tie down fees
that are not common

costs and are associated with aircraft usage are considered variable
costs. Tie down fees for

storing an aircraft at its base of operations should be considered a
fixed cost. Include the

historic fees paid or assessed per landing, times landings, divided by
projected hours flown.

5\. Variable maintenance and spares.

All maintenance activities and parts costs based on aircraft use are
variable costs. All

non-scheduled maintenance and all non-scheduled maintenance inspections
are also variable

costs. Maintenance and inspection activities scheduled on a calendar
interval basis will be

considered fixed. In addition to the costs of normal maintenance
activities, variable maintenance

costs include aircraft refurbishment, such as painting and interior
restoration, and costs of or

allowances for performing overhauls and modifications required by
service bulletins and

airworthiness directives.

a\. Maintenance labor. All labor expended by mechanics, exclusive of the
overhaul or major

repair of components and engines.

b\. Maintenance parts. This includes materials and parts consumed in
aircraft maintenance and

inspections, exclusive of materials and parts for engine overhaul,
aircraft refurbishment, and/or

repair of major components. Typical items in this category are tires,
instruments, avionics,

generators, relays, pumps, brakes, filters, airframe hardware, windows,
interiors, paint,

shafting, and bearings not inside components covered under an overhaul.

c\. Maintenance contracts. This includes all contracted costs for
unscheduled maintenance and

for maintenance scheduled on a flying hour basis or based on the
condition of the part or

component.

d\. Engine overhaul, aircraft refurbishment, and major component
repairs. These are the

materials and labor costs of overhauling engines, refurbishing aircraft,
and/or repairing major

aircraft components.

e\. Reserves. This is for overhauling components of engines, and other
major work including

painting, refurbishment of the aircraft interior, and expenses not
recognized in other

maintenance accounts.

f\. Add lines 5a through 5e and enter on line 5f for the total cost of
direct variable maintenance

and spares.

6\. Add lines 1 through 4 and 5f to find the total direct operations
cost per flying hour.

7\. Enter the annual number of hours flown from the PWS/PRS.

8\. Multiply the total direct operating cost per flying hour (line 6) by
the number of hours flown

(line 7) to find the total direct operating cost.

F. Standard aviation operation cost elements\--fixed

The fixed costs of operating aircraft are those that result from owning
and supporting the

aircraft and do not vary according to aircraft usage.

9\. Crew. Federal pilots/crew are often paid whether or not the aircraft
are flown. These fixed

crew costs include the salaries, benefits, and training costs of crew
members who perform

minimal aircraft maintenance or other administrative tasks that could be
impacted by a

conversion to contract performance. Also included in fixed crew costs
are the costs of their

charts, personal protective equipment, uniforms, and other personal
equipment when the

agency is authorized to purchase such items. Non-aviation activities
performed by pilots/crew

that would continue even if operations were converted to contract should
not be included.

10\. Fixed maintenance.

Maintenance and inspection activities are scheduled on a calendar
interval basis and take place

regardless of whether or how much the aircraft are flown. These are
fixed costs, including labor

and material.

a\. Maintenance labor. This includes all projected labor expended by
mechanics, technicians,

and inspectors associated with maintenance scheduled on a calendar
interval basis. This

category also includes costs associated with non-allocated maintenance
labor expenses; i.e.,

associated salaries, benefits, travel expenses, and training costs.
These costs should be evenly

allocated over the number of aircraft in the fleet.

b\. Maintenance parts. This includes all parts and consumables used for
maintenance scheduled

on a calendar interval basis.

c\. Maintenance contracts. This includes all contracted costs for
maintenance or inspections

scheduled on a calendar interval basis.

11\. Aircraft lease. When aircraft are leased for 90 days or more, with
a known fee, utilization

rate or minimum reimbursement guarantee, the associated lease costs are
considered fixed.

Include the entire amount paid.

12\. Depreciation.

As provided in Part II of this Supplement, aircraft and other major
asset (hangar) depreciation

costs are added to each option year. Aircraft have finite economic or
useful service lives.

Depreciation is the method used to spread the acquisition cost, less
residual value, over an

asset\'s useful life. Although these costs are not direct outlays as is
the case with most other

costs, it is important to recognize them for analysis. Subtract the
residual (not market) value

from the total of the acquisition cost plus any capital improvements
and, then, divide by the

remaining estimated useful life of the asset\--not less than the cost
comparison period.

a\. The acquisition cost is the value initially recorded on agency
property/accounting records at

the time of acquisition. If the aircraft is acquired through an
interagency transfer, the acquisition

cost is the greater of the aircraft net book value plus the cost of
returning the aircraft to an

airworthy, mission ready condition or the commercial retail value of
that aircraft in average

condition, as established by the Aircraft Bluebook Price Digest or other
industry standard. If it

is a military aircraft without a direct commercial equivalent, the
acquisition cost is equal to the

most comparable commercial equivalent plus the cost of returning the
aircraft to an airworthy,

mission ready condition. The following explains the relevant terms:

b\. Useful life. Useful life is the estimated period during which the
aircraft will be used. If a new

aircraft has an airframe with a design life of 10,000 hours and the
agency expects to fly the

aircraft 500 hours per year, the useful life is twenty years.

c\. Residual value. Residual value reflects the historically expected
condition of the asset at the

end of its useful life. It is the dollar value below which the asset
will not be depreciated.

Residual value is established at the time of acquisition. Agencies will
select the lessor of the

following methods to calculate the residual value of aircraft:

\(1\) Assume a 10 percent residual value for purposes of calculating the
depreciable value of the

aircraft and annual depreciation expenses.

\(2\) Select the average of the historic resale value of similar
aircraft by age and type, as

provided by GSA.

d\. Reconstructions, conversions, refurbishment, and certification of
ex-military aircraft. These

maintenance efforts add value or prolong the life of aircraft. They are
capital improvements that

add to the Net Book Value of the asset (acquisition cost less
accumulated depreciation). This

revised total value should then be depreciated over the remaining or
extended useful life of the

asset.

e\. Fully depreciated assets. If an asset has been fully depreciated or
has exceeded its expected

useful life, recalculate the depreciation schedule through the end of
the cost comparison period.

13\. Self insurance costs.

Aviation activity involves risks, potential casualty losses and
liability claims. These risks are

covered in the commercial sector by purchasing insurance, the costs for
which are captured

within the GSA FAIRS system. Actual or historic agency costs are not
comparable with the

costs included in the commercial bid (FAIRS) or representative of the
overall cost to the

Government as a whole.

a\. Agencies should calculate annual in-house hull aircraft casualty
insurance costs by multiplying

the \"Blue Book\" or market value of the aircraft by the insurance
factors provided annually by

the General Services Administration\'s Aircraft Management Division.
Enter these cost estimates

on line 13a.

b\. Agencies should calculate annual Federal aircraft liability
insurance costs on the basis of the

number of aircraft seats the agency has or will install, including
pilots, over the course of the

cost comparison period. Enter the aircraft liability cost developed
using data provided annually

by the General Services Administration\'s Aircraft Management Division
on line 13b.

c\. All other insurance costs incurred in the performance of the
aviation service under study are

calculated in accordance with Part II and entered on Line 13a or 13b, as
appropriate.

d\. Enter the total for all insurance (sum of lines 13a through 13c) on
Line 13d.

14\. Overhead. This includes all costs associated with operational and
administrative overhead.

As described in Part II of this Supplement, aviation management overhead
costs shall be

calculated by applying the standard overhead cost factor of 12 percent
to the total of lines 2,

5.a, 9 and 10.a of the Aircraft and Aviation Cost comparison Form. Enter
the total of this

calculation on Line 14.

15\. Cost of capital or finance expense.

a\. The cost of capital is the annual cost to the Government of
acquiring the funds necessary for

capital investments. The cost of capital is applied to the outstanding
balance of the aircraft

purchase price for each year of the performance period.

b\. The annual cost of capital is included for any depreciable asset
acquired less than two years

prior to or after the cost comparison that will be used as a part of the
MEO. The cost of capital

is only applicable to assets required by the MEO that will not be
provided (GOCO) to the

commercial source.

c\. The cost of capital is calculated by applying OMB Circular A-94
\"Discount Rates to be

Used in Evaluating Deferred Costs and Benefits,\" plus any capital
improvements.

d\. If the purchase price is unknown, as in the case of a forfeited
asset or interagency transfer,

the acquisition cost is the greater of the aircraft net book value plus
the cost of returning the

aircraft to an airworthy, mission ready condition or the commercial
retail value of that aircraft in

average condition, as established by the Aircraft Bluebook Price Digest
or other industry

standard. If it is a military aircraft without a direct commercial
equivalent, the acquisition cost is

equal to the most comparable commercial equivalent plus the cost of
returning the aircraft to an

airworthy, mission ready condition.

e\. Aircraft acquired through lease/purchase arrangements are not be
burdened with the cost of

capital. The cost of capital is assumed to exist in the lease/purchase
agreement. At the transfer

of title, depreciation expenses, calculated from the then existent
market price of the aircraft, will

be incurred.

16\. Total fixed operating costs. Add lines 9 through 15 and enter on
line 16.

17\. Total in-house MEO performance costs. Add lines 8 and 16 and enter
on line 17.

G. Standard aviation operation cost elements\--developing the cost of
contract

performance

18\. Contract cost.

a\. The comparable cost of contract performance is to be calculated on
the Aviation CCF.

b\. The most efficient commercial cost of meeting the service
requirement is to be entered if a

solicitation was issued requesting formal bids. If GSA/FAIRS data is
being used to estimate

contract costs, this figure is established by reviewing existing
contracts and rental/charter flight

rate information provided by FAIRS or from other GSA approved sources.

c\. Enter the estimated trip costs times the number of trips/missions or
the hourly rate for that

aircraft times the number of estimated hours flown from the PWS/PRS on
line 19. If FAIRS

does not reflect the aircraft services requirements, and reasonably
accurate costs cannot be

constructed by extrapolation from the FAIRS database, agencies may
utilize other approved

data sources.

19\. Cost construction to meet PWS/PRS.

There may be other adjustments necessary to estimate the cost of
contract performance using

GSA/FAIRS data. The following are other costs that may be considered and
entered\--to the

extent that they are not common costs or costs included in the
published/developed rates. All

such costs will be fully justified and made available for public review.

a\. Daily Availability/Standby/Guarantee Hours.

b\. Additional Pilot and Crew Charges.

c\. Additional Maintenance Support.

d\. Airframe Alteration/Equipment Installation.

e\. Equipment Not Provided by the Government.

f\. Additional Ground Service Support.

g\. Travel and Per Diem.

h\. Service Equipment Mileage.

i\. Airport Fees.

j\. Other.

20\. Contract administration. There will be costs that the agency incurs
in administering the

contract. These costs are relevant only if they differ between in-house
and contract alternatives.

Agencies should refer to Part II, Chapter 3, Table 3-1 for guidance.

21\. One-time conversion costs. See Part II, Chapter 3 of this
Supplement.

22\. Gain from disposal/transfer of assets. See Part II Chapter 3 of
this Supplement.

23\. Federal income tax. Multiply line 19 as provided in Appendix 5 and
enter as a

savings/revenue to the Government caused by the conversion to contract
performance.

24\. Total estimated cost of contract performance. This element reflects
the total of lines 18

through 24.

H. Aviation cost comparison of in-house versus contractor or ISSA
performance.

25\. In-house performance costs. Data is taken from Line 17\--for each
year of performance as

established in the PRS, but not less than three years.

26\. Contract or ISSA performance. Data is taken from line 24\--for each
year of performance.

27\. Conversion differential. As provided in Part II of this Supplement,
a conversion differential

equal to the lesser of; (1) 10 percent of the in- house personnel
related costs (total of Lines 2,

5.a, 9 and 10.a.) or (2) \$10 million over the performance period, is
added to the total cost of

current method of performance. Enter the result of this calculation on
Line 27.

28\. Adjusted total cost of in-house performance. If the cost comparison
is being conducted to

determine if an aircraft or aviation service should be converted from
contract or ISSA

performance to in-house operation, the conversion differential as
calculated above (Line 27) is

added to the In-house performance cost estimate (Line 25, Total Column
only) and the sum is

entered under Adjusted Total Cost of In-House Performance (Line 28). The
amount in the

Total Column for Line 26 is replicated on Line 29.

29\. Adjusted total cost of contract performance. If the cost comparison
is being conducted to

determine if an aircraft or aviation service should be converted from
in-house operation to

contract or ISSA performance, the conversion differential as calculated
above (Line 27) is

added to the Contract performance cost estimate (Line 26, Total Column
only) and the sum is

entered under Adjusted Total Cost of Contract Performance(Line 29). The
amount in the Total

Column for Line 25 is replicated on Line 28.

30\. Decision. Subtract Line 28 from Line 29 and enter the result on
Line 30. A positive amount

on Line 30 supports a decision to perform the aircraft and aviation
support activity with

in-house resources. A negative amount on Line 30 supports a decision to
accomplish the work

with contract resources.

31\. Cost comparison decision.

Indicate in the appropriate block on line 31 the decision supported by
line 30.

a\. If the result of the comparison is a decision to accomplish the work
with contract resource

and that decision is affirmed after adjustments by the public review,
the agency will:

\(1\) Expand the Performance Requirements Summary developed under the
aviation

methodology to meet the requirements of a Performance Work Statement.

\(2\) Issue a formal solicitation for bids from the commercial sector
and convert to contract.

b\. If the decision of the aviation cost comparison is to accomplish the
work with in-house

resources, and that decision is affirmed after adjustments by the public
review, the agency will

announce the final decision in the Commerce Business Daily. The results
will be recorded in the

OMB Circular A-76 tracking system.

**Appendix G**

**U.S. Government Standard General Ledger Chart of Accounts**

**U.S. Government Standard General Ledger Chart of Accounts**

This document and all other materials regarding the US Standard General
Ledger accounting system may be found at the following website:

[www.fms.treas.gov/ussgl](http://www.fms.treas.gov/ussgl)

The Chart of Accounts is Section 1 of the USSGL TFM. The description of
these accounts is found in section 2. These sections are available as
Adobe Acrobat PDF files. The Chart of Accounts listing is 16 pages and
the description of the accounts is 73 pages.

**Appendix H**

**Additional Sources of Information**

**Additional Sources for Information**

Additional resources may be found in the following

H.1 Reference books

The following books provide additional information on the accounting
process and principals.

[Finance and Accounting for Nonfinancial Managers.]{.underline} Steven
A. Finkler. Prentice Hall, Englewood Cliffs, NJ 07632. 1992

[Financial Management. (Second Edition).]{.underline} Joel G. Siegel,
CPA and Jae K. Shim, PhD. Barron's Business Library, 250 Wireless Blvd.
Hauppauge, NY 11788. 2000

[Accounting]{.underline}. Charles T. Horngren and Walter T. Harrison,
Jr. Prentice Hall, Englewood Cliffs, NJ 07632. 1989

H.2 Databases

The following databases provide acquisition and operating cost
information.

[Aircraft Acquisition Costs]{.underline}

1.  Aircraft Blue Book Price Digest (general aviation fixed and rotary
    wing aircraft)

Intertec Publishing

PO Box 12901

Overland Park, KS 66282

1 800 654 6776

1.  Airliner Price Guide (airline aircraft)

PO Box 270485

Oklahoma City, OK 73137

\(405\) 942 8225

1.  Official Helicopter Blue Book (helicopters)

HeliValue\$, Inc.

PO Box 876

Lincolnshire, IL 60069

\(847\) 634 3877

[Aircraft Operating Costs]{.underline}

1.  Aircraft Cost Evaluator

Conklin & de Decker Associates, Inc.

PO Box 1142

Orleans, MA 02653

\(508\) 255 5975

1.  Helicopter Equipment List and Prices

HeliValue\$, Inc.

PO Box 876

Lincolnshire, IL 60069

\(847\) 634 3877

1.  Life Cycle Cost Analyzer

Conklin & de Decker Associates, Inc.

PO Box 1142

Orleans, MA 02653

\(508\) 255 5975

[Charter Aircraft Costs]{.underline}

1.  Aircraft Charter Guide

Charter Guides

104 Mt Auburn

Cambridge, MA 02138

\(617\) 547 5811

[^1]: Allocation is appropriate only for costs that cannot be tracked or
    accounted to a particular aircraft. Overhead costs are typically
    allocated. Discrete costs such as fuel, maintenance labor, parts,
    and flight crews should be accounted by individual aircraft.