Expenditures for equipment and renovations (capital expenditures) often
provide a benefit over several years. These expenditures would distort the
measurement of the recharge operation's annual performance if they were charged
to Ledger 2 when paid. Therefore,
it is necessary to record them in a separate group of accounts (plant funds)
that allows the recharge to track the expenditures yet reflect them in Ledger
2 based on the periods of use (i.e., depreciation). A detailed list of accounting
transactions follows.
| A. |
Requesting an internal loan to finance a capital expenditure
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Recharge operations must apply for an internal loan. The
loan is obtained by completing a "Request for Internal Loan"
application form from the Comptroller's Office. |
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| B. |
Recording an equipment purchase |
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Equipment purchases with a cost greater than $5,000 and
a useful life of 1 year or more, should be recorded in Ledger
8 using subaccount 6000 through 6999. If an equipment purchase does
not meet the "cost greater than $5,000 and a useful life of 1 or more
year" criteria, it should be charged to a supply subaccount (5000-5999)
in the recharge operation's Ledger 2 account. To record the purchase of
equipment greater than $5,000, use the following entry. |
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(Forms: Purchase order, vendor invoice and approved
receiving copy) |
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Debit: |
Plant Fund: Equipment expense |
8-XXXXX-6XXX |
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| C. |
Recording construction/renovation project costs |
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Construction/renovation projects with a cost greater than $10,000 are
recorded in ledger 8 using 8700 through 8899 subaccounts. If the project
cost does not meet the "greater than $10,000" criteria, then
the expenses should be recorded in the physical plant department services
subaccount (3700-3799) in Ledger 2, if the work is performed by the University's
Physical Plant Department. For work less than $10,000, that is performed
by outside contractors, use subaccounts in the 8700-8899 range. To record
renovation project costs greater than $10,000, use the following entry. |
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(Form: Physical Plant Department Work Order) |
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Debit: |
Plant Fund: Equipment expense |
8-XXXXX-8700/8899 |
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| D. |
Recording equipment and renovation depreciation
expense transfers |
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Depreciation is the allocation of capital expenditures to the periods
of use of benefit. In addition, the depreciation expense transfer repays
the internal loan. To record a depreciation expense transfer, use the
following entry. |
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(Form: Comptroller's Form 60) |
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Debit: |
Recharge Ledger 2: Depreciation expense transfer |
2-XXXXX-9477 |
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Credit: |
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Plant fund: Depreciation expense transfer |
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0-8XXXX-9417 |