(REVISED 8/31/98 per TFM S2-98-02)

PRESENTATION TO THE

STANDARD GENERAL LEDGER BOARD

SGL IMPACT

FASAB STANDARD #4

MANAGERIAL COST ACCOUNTING CONCEPTS AND STANDARDS

FOR THE FEDERAL GOVERNMENT

AUGUST 28, 1997

IRC COST SUBCOMMITTEE:

Karen Metler (Financial Management Service)

Judy Yuran (Financial Management Service)

Christine Chang (Financial Management Service)

Karen Brown (Department of Agriculture - FCS)

Phil Daniels (Department of Interior)

Donna Dull (National Aeronautics and Space Administration)

Jack Hafner (National Aeronautics and Space Administration)

Greg James (Department of Labor)

Veronica Kitchen (Housing and Urban Development)

Vivian Lu (Department of Agriculture)

Richard Mayo (Federal Accounting Standards Advisory Board)

David Mielke (National Aeronautics and Space Administration)

Sue Mundstuk (Health and Human Services)

Eileen Parlow (Department of Education)

Jerry Ross (Customs)

Pat Smith (Department of Agriculture)

Damon Sutton (Health and Human Services)

Peter Vieira (Department of State)

Rick Wascak (Federal Accounting Standards Advisory Board)

Presented by:

Financial Management Service

Karen Metler, Cost Subcommittee Chairperson, 

Standard General Ledger

Phone: (202) 874-3815

Fax: (202) 874-7232
TABLE OF CONTENTS

SECTION I - Proposal for Restructuring of the Expense Account Series

Proposed New SGL Accounts ....................................................................... 1

Proposed Changes to Existing SGL Accounts .............................................. 3

Proposed Deletions of Current SGL Accounts .............................................. 5

SECTION II - Case Study

Case Study Guidelines .................................................................................. 6

Expense Account Scenario - Illustrative Transactions, Trial Balances

and Closing Entries ....................................................................................... 7

Statement of Net Cost ................................................................................... 14

Statement of Financing ................................................................................. 15

Illustrative Manufacturing Transactions ....................................................... 16
SECTION I

Proposal for

Restructuring of the Expense Account Series
1

Proposed NEW SGL Accounts

Account Title: Expenses Not Requiring Budgetary Resources

Account Number: 6700

Normal Balance: Debit

Type of Account: Summary

Definition: Expenses that do not require budgetary resources, which are most commonly the

result of allocating asset costs to expenses over more than one reporting period (e.g.

depreciation).

Justification: This is a summary account for the following posting accounts (6710, 6720, 6730,

6790) which are needed in order to prepare the Statement of Financing. 

Account Title: Depreciation, Amortization and Depletion

Account Number: 6710

Normal Balance: Debit

Type of Account: Posting

Definition: Expenses recognized by the process of allocating costs of assets (tangible or

intangible) over their useful lives/periods benefitted. 

Justification: Statement of Financing, Line 3A

Account Title: Bad Debt Expense

Account Number: 6720

Normal Balance: Debit

Type of Account: Posting

Definition: The amount of bad debt expense related to uncollectible non-credit reform

receivables from the public.

Justification: Statement of Financing, Line 3B
2

Account Title: Imputed Costs

Account Number: 6730

Normal Balance: Debit

Type of Account: Posting

Definition: Costs incurred which are paid in total or in part by other entities.

Justification: To offset Imputed Financing Sources

Account Title: Other Expenses Not Requiring Budgetary Resources

Account Number: 6790

Normal Balance: Debit

Type of Account: Posting

Definition: Other costs which do not require budgetary resources.

Justification: Statement of Financing, Line 3E

Account Title: Future Funded Expenses

Account Number: 6800

Normal Balance: Debit

Type of Account: Posting

Definition: The amount of accrued expenses which are required to be funded from future year

appropriations. Examples include, but are not limited to, accrued annual leave expense, accrued

worker’s compensation, and upward subsidy re-estimates for Credit Reform loan programs.

Justification: Statement of Financing, Line 4
3

Proposed CHANGES to Existing SGL Accounts

Account Title: Operating Expenses/Program Expenses Costs

Account Number: 6100

Normal Balance: Debit

Type of Account: Posting

Definition: Operating expenses and program costs not otherwise classified below.

Operating/Program Expense is (1) the total outlay in cash or its equivalent applied in carrying out

a specific program or function, (2) the total cost of goods sold plus all selling, administrative, and

general expenses applicable thereto, and (3) the total cost assignable against operating income or

profit.

Justification: The definition has been revised to reflect the changes made to the following

accounts (6400, 6500, 6700 series, 6800, and 6900).

Account Title: Cost of Goods or Services Sold

Account Number: 6500

Normal Balance: Debit

Type of Account: Posting

Definition: The total cost of goods or services sold at point of sale including the inventory

value of commodities sold from stock and all labor, material, and other expenses applied to

manufactured items sold.

Justification: To maintain the traditional concept for Cost of Goods Sold as it relates to

manufactured items sold.

Account Title: Other Expenses Non Production Costs

Account Number: 6900

Normal Balance: Debit

Type of Account: Posting

Definition: Expenses not otherwise classified above. Costs incurred and recognized that are

linked to events other than the production of goods and services. Examples include, but are not

limited to, OPEB (refer to SFFAS #5, ¶94-96), acquisition of Federal Mission Property, Plant and

Equipment, Heritage PP&E, Stewardship Land, reorganization costs, and nonrecurring cleanup

costs resulting from facility abandonments that are not accrued. This is in accordance with

FASAB #4 - Managerial Cost Accounting Concepts and Standards for the Federal Government

¶103-104.
4

Justification: “Other Expenses” is no longer needed as these amounts can now be captured in

the other expense accounts. “Non Production Costs” is needed in accordance with FASAB #4 -

Managerial Cost Accounting Concepts and Standards for the Federal Government ¶103-104 and

for better facilitation of the Statement of Net Cost.
5

Proposed DELETIONS of Current SGL Accounts

Account Title: Benefit Program Expenses

Account Number: 6400

Normal Balance: Debit

Type of Account: Posting

Definition: Amounts paid to benefit programs by agencies on behalf of their employees.

Justification: This account is no longer necessary. Depending upon the nature of the fund, the

amount will be captured in account 6100, 6800, 6900, or 7600.
SECTION II

Case Study
6

Case Study Guidelines

The following case study is presented to demonstrate the use of new or revised U.S. Standard

General Ledger accounts being proposed to the U.S. Standard General Ledger Board for

implementation for fiscal years beginning October 1, 1998. The case study focuses on expense

accounts only, and does not cover all situations. It, in no way, purports to represent the

transactions of a specific agency of the U.S. Government. The transactions contained within are

illustrative in nature and are not to be taken as formal guidance for any specific account type.

Furthermore, the sample reports presented after the case study are included to demonstrate, only

as examples, how the new or revised accounts would be reported on Form and Content reports

mandated by OMB Bulletin No. 97-01 (Form and Content), dated October 16, 1996. The use of

sample formats from Form and Content does not preclude an agency from using its own

judgement consistent with OMB guidance. 
7

EXPENSE ACCOUNT SCENARIO

ILLUSTRATIVE TRANSACTIONS

** BOLD indicates new/modified accounts proposed for Fiscal Year 1999 implementation

1. Agency receives appropriation (20,000) and estimated reimbursements (10,000) which are

fully apportioned and allotted. Warrant is issued from Treasury.

Proprietary

1010 Fund Balance with Treasury 20,000

3100 Unexpended Appropriations 20,000

Budgetary

4119 Other Appropriations Realized 20,000

4210 Anticipated Reimbursements and Other Income 10,000

4610 Allotments - Realized Resources 20,000

4590 Apportionments - Unavailable 10,000

2. Received order from another government entity

Proprietary 

1010 Fund Balance with Treasury 8,000

2310 Advances from Others 8,000

Budgetary

4590 Apportionments - Unavailable 8,000

4610 Allotments - Realized Resources 8,000

4222 Unfilled Customer Orders With Advance 8,000

4210 Anticipated Reimbursements and Other Income 8,000
8

3. To record estimated uncollectible receivables from the public not associated with

exchange revenue

Proprietary

6720 Bad Debt Expense 400

1319 Allowance for Loss on Accounts Receivable 400

Budgetary (none)

4. Agency orders equipment

Proprietary (none)

Budgetary

4610 Allotments - Realized Resources 5,000

4801 Undelivered Orders - Unpaid 5,000

5. Agency receives equipment above and pays invoice

Proprietary 

1750 Equipment 5,000

1010 Fund Balance with Treasury 5,000

3100 Unexpended Appropriations 5,000

5700 Appropriations Used 5,000

Budgetary

4801 Undelivered Orders - Unpaid 5,000

4902 Expended Authority - Paid 5,000

6. To record depreciation for use of this equipment

Proprietary 

6710 Depreciation, Amortization and Depletion 500

1759 Accumulated Depreciation on Equipment 500

Budgetary (none)
9

7. To record obligation for acquisition of federal mission PPE

Proprietary (none)

Budgetary

4610 Allotments - Realized Resources 10,000

4801 Undelivered Orders - Unpaid 10,000

8. To record acquisition and payment of federal mission PPE

Proprietary

6900 Non Production Costs 10,000

1010 Fund Balance with Treasury 10,000

3100 Unexpended Appropriations 10,000

5700 Appropriations Used 10,000

Budgetary

4801 Undelivered Orders - Unpaid 10,000

4902 Expended Authority - Paid 10,000

9. To obligate for expenses related to reimbursable order

Proprietary (none)

Budgetary

4610 Allotments - Realized Resources 1,000

4801 Undelivered Orders - Unpaid 1,000
10

10. To record expenses and earnings from previous entry related to services performed for

another government entity

Proprietary

6100 Operating Expenses/Program Costs 1,000

1010 Fund Balance with Treasury 1,000

2310 Advances from Others 1,000

5200 Revenue from Services Provided 1,000

Budgetary

4801 Undelivered Orders - Unpaid 1,000

4902 Expended Authority - Paid 1,000

4252 Reimbursements and Other Income Earned - Coll 1,000

4222 Unfilled Customer Orders With Advance 1,000

11. To record accrued annual unfunded leave liability

Proprietary

6800 Future Funded Expenses 1,500

2220 Accrued Unfunded Liabilities 1,500

Budgetary (none)

12. To record pension expense (portion not paid by agency). (Assume cost of pensions are

10,000 in excess of agency and employee contributions based upon receipt of OPM

memo.)

Proprietary

6730 Imputed Costs 10,000

5780 Imputed Financing Sources 10,000

Budgetary (none)
11

PRE-CLOSING TRIAL BALANCES

Proprietary

1010 Fund Balance with Treasury 12,000

1319 Allowance for Loss on Accounts Receivable 400

1750 Equipment 5,000

1759 Accumulated Depreciation on Equipment 500

2220 Accrued Unfunded Liabilities 1,500

2310 Advances from Others 7,000

3100 Unexpended Appropriations 5,000

5200 Revenue from Services Provided 1,000

5700 Appropriations Used 15,000

5780 Imputed Financing Sources 10,000

6100 Operating Expenses/Program Costs

6710 Depreciation, Amortization, and Depletion

6720 Bad Debt Expense

6730 Imputed Costs

6800 Future Funded Expenses

6900 Non Production Costs

TOTALS 40,400 40,400

1,000

500

400

10,000

1,500

10,000

Budgetary

4119 Other Appropriations Realized 20,000

4210 Anticipated Reimbursements and Other Income 2,000

4222 Unfilled Customer Orders With Advance 7,000

4252 Reimbursements and Other Income Earned-Coll 1,000

4590 Apportionments - Unavailable 2,000

4610 Allotments - Realized Resources 12,000

4902 Expended Authority - Paid 16,000

TOTALS 30,000 30,000
12

CLOSING ENTRIES

Proprietary

C1) 5200 Revenue from Services Provided 1,000

5700 Appropriations Used 15,000

5780 Imputed Financing Sources 10,000

3310 Cumulative Results of Operations 26,000

C2) 3310 Cumulative Results of Operations 23,400

6100 Operating Expenses/Program Costs 1,000

6710 Depreciation, Amortization, and Depletion 500

6720 Bad Debt Expense 400

6730 Imputed Costs 10,000

6800 Future Funded Expenses 1,500

6900 Non Production Costs 10,000

Budgetary

C1) 4590 Apportionments - Unavailable 2,000

4210 Anticipated Reimbursements and Other Income 2,000

C2) 4201 Total Actual Resources - Collected 21,000

4119 Other Appropriations Realized 20,000

4252 Reimbursements and Other Income Earned - Collected 1,000

C3) 4610 Allotments - Realized Resources 12,000

4450 Unapportioned Authority - Available 12,000

C4) 4902 Expended Authority - Paid 16,000

4201 Total Actual Resources - Collected 16,000
13

POST-CLOSING TRIAL BALANCES

Proprietary

1010 Fund Balance with Treasury 12,000

1319 Allowance for Loss on Accounts Receivable 400

1750 Equipment 5,000

1759 Accumulated Depreciation on Equipment 500

2220 Accrued Unfunded Liabilities 1,500

2310 Advances from Others 7,000

3100 Unexpended Appropriations 5,000

3310 Cumulative Results of Operations 2,600

TOTALS 17,000 17,000

Budgetary

4201 Expended Authority - Unpaid 5,000

4222 Unfilled Customer Orders With Advance 7,000

4450 Unapportioned Authority - Available 12,000

TOTALS 12,000 12,000

STATEMENT OF NET COST
14

Program Costs

Intragovernmental

Production (6100+6730+6800) 12,500

Nonproduction 0

Public

Production (6720+6710+6800) 900

Nonproduction (6900) 10,000

Total Program Cost 23,400

Less Earned Revenues (5200) (1,000)

Net Program Costs 22,400

Costs Not Assigned to Programs 0

Less Earned Revenues Not Attributable to Programs 0

Deferred Maintenance (Note reference) 

Net Cost of Operations 22,400

The elements contained in this case study are illustrative in nature. Statement formats are generally taken from OMB Circular 97-01 (Form and

Content of Agency Financial Statements, dated October 16, 1996). OMB has the authority to specify the form and content of agency financial

statements, so these samples are not authoritative. Furthermore, the references to account numbers and/or calculations that crosswalk to these

statements shown above illustrate the result of the preceding transactions only. They do not demonstrate all of the USSGL accounts used on each

statement. Refer to crosswalks published in the Treasury Financial Manual Supplement #2 for official guidance on crosswalks to each statement.

STATEMENT OF FINANCING

Obligations and Nonbudgetary Resources
15

Obligations Incurred (4902) 16,000

Less: Spending Authority from Offsetting Collections and Adjustments

Earned Reimbursements - Collected (4252) (1,000)

Increase in Unfilled Customer Orders (4222) (7,000)

Financing Imputed for Cost Subsidies (5780) 10,000

Total Obligations as Adjusted and Nonbudgetary Resources 18,000

Resources That Do Not Fund Net Cost of Operations

Costs Capitalized on the Balance Sheet:

 

General Property, Plant and Equipment(1750-1759+6710) (5,000)

Other: Increase in Unfilled Customer Orders (4222) 7,000

Total Resources That Do Not Fund Net Costs of Operations 2,000

Costs That Do Not Require Resources

Depreciation and Amortization (6710) 500

Bad Debts Rel to Uncoll Non-Credit Reform Receivables (6720) 400

Total Costs That Do Not Require Resources 900

Financing Sources Yet to be Provided (6800) 1,500

Net Cost of Operations 22,400

The elements contained in this case study are illustrative in nature. Statement formats are generally taken from OMB Circular 97-01 (Form and

Content of Agency Financial Statements, dated October 16, 1996). OMB has the authority to specify the form and content of agency financial

statements, so these samples are not authoritative. Furthermore, the references to account numbers and/or calculations that crosswalk to these

statements shown above illustrate the result of the preceding transactions only. They do not demonstrate all of the USSGL accounts used on each

statement. Refer to crosswalks published in the Treasury Financial Manual Supplement #2 for official guidance on crosswalks to each statement.
16

ILLUSTRATIVE ENTRIES FOR A MANUFACTURING ENTITY

These entries are for illustrative purposes only, and do not correspond in any way to the

previous entries. Likewise, the amounts are not included in the Trial Balances, Closing Entries

or Form and Content Statements that are present in this proposal. These entries are provided to

illustrate the use of the proposed expense accounts for a manufacturing entity. A comprehensive

inventory scenario, including this portion, will be available in the near future.

1. To record factory overhead (2,000) such as rent and utilities, depreciation on equipment

(500), and indirect labor (3,000)

Proprietary

6100 Operating Expenses/Program Costs (overhead) 5,000

6710 Depreciation, Amortization and Depletion (overhead) 500

1759 Accumulated Depreciation on Equipment 500

2110 Accounts Payable 2,000

2210 Accrued Funded Payroll and Benefits 3,000

Budgetary

4801 Undelivered Orders - Unpaid 5,000

4901 Expended Authority - Unpaid 5,000

2. To record applied overhead (the budget rate is determined to be $5.00/per direct labor

hour. The direct labor hour was determined to be 900 hours. 900 hours * $5.00 =

$4,500) 

Proprietary

1526 Inventory - Work in Process 4,500

6600 Applied Overhead 4,500

Budgetary (none)
17

3. To record sale of goods

Proprietary

6500 Cost of Goods Sold 8,000

1527 Inventory - Finished Goods 8,000

1310 Accounts Receivable 10,000

5100 Revenue from Goods Sold 10,000

Budgetary

4251 Reimbursements and Other Income Earned - Receivable 10,000

4221 Unfilled Customer Orders Without Advance 10,000
 If the underapplied or overapplied amount is immaterial, the difference in the applied and the actual amount is 1

adjusted to Cost of Goods Sold. But if the underapplied or overapplied amount is material then the difference is prorated

to Work in Process, Finished Goods, and Cost of Goods Sold. (Charles T. Horngren, George Foster, Cost Accounting A

Managerial Emphasis, 6th edition, pp. 103-104). 

18

4. To close underapplied overhead (overhead is budgeted less than the actual), which is 1

deemed immaterial

Proprietary

6600 Applied Overhead 4,500

6500 Cost of Goods Sold 1,000

6100 Operating Expenses/Program Costs (overhead) 5,000

6710 Depreciation, Amortization, and Depletion (overhead) 500

(If overapplied, the adjustment would be credited to Cost of Goods Sold.)

Budgetary (none)

If the difference between the actual and applied amount is material, then the difference is

prorated to Work in Process, Finished Goods and Cost of Goods Sold. 

To close overhead accounts and prorate underapplied overhead among the three

accounts:

1526 Inventory - Work in Process xxx

1527 Inventory - Finished Goods xxx

6500 Cost of Goods Sold xxx

6600 Applied Overhead xxx

6100 Operating Expenses/Program Costs (overhead) xxx

(and other actual overhead accounts) xxx

To close overhead accounts and prorate overapplied overhead among the three

accounts:

6600 Applied Overhead xxx

1526 Inventory - Work in Process xxx

1527 Inventory - Finished Goods xxx

6500 Cost of Goods Sold xxx

6100 Operating Exp/Program Costs (overhead) xxx

(and other actual overhead accounts) xxx