FAS Gargoyle
 
FAS User's Manual
Table of Contents
 

 

Overview of Accounting 

FAS is a double entry accounting system which ensures that the following accounting equation is always in balance, and is always equal to zero. 

    Assets minus Liabilities equals Fund Balance (also called Net Assets). 

    An asset is something owned—either cash or something that could be sold or collected to turn into cash, like equipment or a receivable. 

    A liability is something owed—such as a payment to a vendor (an account payable) or a mortgage on a building. 

    The fund balance (which is called "Net Assets" in the University’s year-end financial statements) is simply the difference between assets and liabilities—the "bottom line." 

For example, tuition payments of $50,000 might be credited to a Ledger 1 account for the Department of Botany, and a Ledger 4 expenditure account might be established for the department with a $50,000 budget. The two accounts map to the same general ledger account. After receipt of tuition payments of $50,000, the accounting equation in the general ledger account would be: 
 
Assets 
minus 
Liabilities 
equals 
Fund Balance 
$50,000 
$50,000– 
 
The signs are reversed, but the amounts on either side of the equation are the same. Therefore, the system is in balance, because the two numbers taken together equal zero. This is the primary rule of accounting: assets minus liabilities equal fund balance. 

If the department approved a $5,000 invoice for payment in 30 days, this $5,000 would represent a liability and would be entered into the equation as follows: 
 

Assets 
minus 
Liabilities 
equals 
Fund Balance 
$50,000 
$5,000– 
$45,000– 
 
When the check is paid to the vender, cash is reduced; the liability goes away; and the equation then reads: 
 
Assets 
minus 
Liabilities 
equals 
Fund Balance 
$45,000 
$45,000– 
 
Again, the system is in balance. 

Since the totals on either side of the equation must be equal, every debit that enters the system must have a corresponding credit. This keeps the system in balance, but it means that signs (+ and –) may sometimes be confusing to the non-accountant. To accountants, a "–" sign indicates a credit, and an entry without a sign indicates a debit. 

FAS uses signs in the following manner: 

Assets are expressed without a sign. A transaction that increases an asset has no sign, while a transaction that decreases an asset has a "–" sign 

 
Cash Balance 
 
New Cash 
 
New Cash Balance 
$10,000 
$5,000 
$15,000 
 
Liabilities are expressed with a "–" sign. A transaction that increases a liability has a "–" sign, while a transaction that decreases a liability has no sign. 
 
Accounts Payable 
 
New Payable 
 
New Payable Balance 
$6,000– 
$1,000– 
$7,000– 
 
Fund balance (or net assets) is the difference between assets and liabilities. A positive fund balance is expressed with a "–" sign. A negative fund balance (overdraft) is expressed with no sign. 

Therefore, summarizing the activity above: 
 

Assets 
minus 
Liabilities 
equals 
Fund Balance 
(Cash) 
 
(Accounts Payable) 
 
(Net Assets) 
$15,000 
$7,000– 
$8,000– 
 
The left side of the equation totals $8,000, the right side totals $8,000–, and the relationship is in balance. 

Fund additions and deductions are entries that affect the fund balance of an account. Examples of fund additions are receipts of gifts, grants, contracts, or investment income. Examples of fund deductions are losses on investments or the return of funds to a granting agency. Fund additions are recorded in the 4000/4999 account control range, and they automatically update claim-on-cash and the appropriate fund balance account control. Fund deductions are recorded in the 5000/5999 account control range and automatically reduce cash and the fund balance. FAS uses signs for fund additions and deductions as follows: 

Fund additions are expressed with a "–" sign. A transaction that increases fund additions has a "–" sign, while a transaction that decreases fund additions has no sign. 

Fund deductions are expressed without a sign. A transaction that increases fund deductions has no sign, while a transaction that decreases fund deductions has a "–" sign. 
 


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