Monday, May 16, 2011

Accounting procedures

4 questions answered through the accounting process
  • Allocations
    o How much money is there to spend?
    Starts from the beginning of the year
  • Encumbrance (Commitment)
    o How much will a purchase probably cost?
    o Orders not yet received, over estimate rather than under estimate
  • Payment
    o How much is actually spent
  • Unencumbered (Uncommitted Balance)
    o How much money is left?
Typical fiscal years
  • April – March (government and public libraries)
  • January – December (corporate libraries)
    o Lots of work
    o Budget needs to be spent in its entirely by December 31
    o If the budget isn’t used in its entirely, it could be cut the following year
  • July – June (academic and school libraries)
Reasons for practicing good accounting procedures
  • Stay within the budget
  • Provide assistance in the budget planning process
  • Create a clear audit trail (all transactions from PO to final payment tracked)
    o Don’t rely on a parent organization to keep track of budget thoroughly
  • Good relations with the finance department and vendors
Reasons for monitoring library’s finances
  • Basis for preparing next year’s budget
  • Information needed for annual report
  • Provides factual background for purchasing decisions
  • Allows comparison with other libraries
Types of allocations/expenses
  • Capital allocations/expenses
    o usually used for items such as equipment which are considered assets by an auditor
    o furniture
  • Operating allocations/expenses
    o used for consumables, e.g. supplies, books, films
Acquisitions cycle

The vendor has a record of estimates and encumberates. The approved invoice needs to be initialed by a library worker to say it is okay and that it can be authorized.

Encumbering (Committing)
  • Placing a hold on funds needed to pay for items when they arrive at a future date
    o set aside, don’t spend on anything else
  • Funds which are encumbered can be released only when
    o item is received and paid for
    o order is cancelled
       * The money is taken out of one column and placed into another.
Fund accounting
  • Accounting system based on collection of separate funds
Maintenance of accounts
  • Expenditures are tracked for each fund account
  • Totals are updated for the following
    o encumbrances
    o payments
    o free balances
    o allocation usually remains the same for the entire fiscal year
Bookkeeping equation
  • Allocations = Liabilities + Fund Balances
  • In library acquisitions, this translates to:
  • Fund allocation = Encumbrances + Payments + Unencumbered balance

Beginning of year

Allocation = encumbrances + payments + unencumbered balance

$12,000.00 = .00 + .00 + $12,000

* At any time of the year, in an ideal situation, encumbrances, payments and unencumbered balances will equal up to the total allocation.


$12,000.00 = $3,000.00 + $4,000.00 + $5,000.00

End of fiscal year

$12,000.00 = .00 + $12,000.00 + .00

Fund accounting
Fund # Allocation PO # Encumberance Payment Unencumbered balance
2450 $12,000.00 $632.99  $0.00  $11,637.01 
$6,000.00 1 $85.00  $5,915.00 
2 $95.00  $5,820.00 
3 $125.00  $5,695.00 
Total $6,000.00  $305.00  $0.00  $5,695.00 
$5,000.00 4 $0.00  $199.99  $4,801.01 
5 $0.00  $25.00  $4,775.01 
$50.00  $4,725.01 
Total $5,000.00  $50.00 $224.99  $4,725.01
2450-PE $1,000.00  $1,000.00
7 $55.00 $945.00 
Total  $1,000.00 $55.00 $945.00 

1 comment:

digital hamster said...

I'm studying to be a library technician, and this has really helped with my understanding of acquisitions. Thanks so much!