1. The Nizwa Municipality created some funds for the management of its activities, each one of the fund has a distinct fiscal and accounting entry, they are as follows:
   1. A capital project fund - earnings of bond issued to support the monetary need to construct a sports complex.
   2. A general fund - for common operating resources that are unrestricted.
   3. An internal service fund – This is a centralized motor vehicle maintenance and repairs service fund. The objective of this fund /unit is to provide maintenance and repair services to other government units that are accounted for under general fund.
   4. A debt service fund – this fund is used to manage the principal and interest of the payment.

Given below the transactions that occurred under Nizwa Municipality for the first year (in OMR):

1. The Nizwa Municipality incurs OMR240 for general operating expenditures. The municipality only pays an amount of OMR 170.

2. The Municipality imposes taxes of OMR300, out of which it is able to recover OMR250. The Municipality expects to recover the due amount of OMR 50 soon after year-end. The recovered taxes are considered to be unrestricted.

3. The municipality issues a long-term bond of OMR 500. The proceeds from the bonds are expected to use for the purchase of sports equipment and other facilities related to sports. Accordingly, they are recorded in a restricted capital project fund. This is a fund that is accounted for as modified accrual basis and it is also a government fund.

4. The municipality purchases OMR 400 of sports equipment using the funds available from capital project funds. Just as the capital project fund recognizes the bond proceeds similarly to revenue, in the same way, it records the acquisition of the sports equipment as spending.

5. The bond agreement states that the municipality has to pay a regular equated installment for repaying the principal of the debt. For this, the municipality allocates OMR 40 to be moved to the debt service fund from the general fund.

6. The repair services, which are accounted as an internal service fund, acquires OMR 10 worth of furniture fitting exchanged for a long term note. The internal service fund is accounted for a full accrual basis.

7. The following events occurred under the internal service fund. The municipality performed few services to other government departments in return for OMR 15 and the municipality recovers full due in Cash. In order to provide service to other departments the fund spends OMR 12 for operating expenses and recognize OMR 2 as depreciation for non-current assets.

Required:

a) Record appropriate journal entries to show the transactions in each specific fund. (7 Marks)

b) Based on the journal entries, prepare a Statement of revenues, expenditures, and changes in governmental fund balances (governmental funds) and also for internal service fund (accrual basis). 

Answer rating: 100% (QA)

In the books of Nizwa Municipality for the Year ended 20XX Journal Entries Sr No Description Debit OMR Credit OMR 1 Operating Expenditure Ac Dr To Cas... View the full answer