Accounting Procedures Handbook

12 LIABILITIES I. OVERVIEW Government-wide financial statements are prepared using the economic resources measurement focus. All assets and liabilities associated with the operation of the Board are included on the statement of net position. Like the government-wide statements, all proprietary funds and non- expendable trust funds are prepared using the accrual basis of accounting. All governmental funds are accounted for using a flow of current financial resources measurement focus. With this measurement focus, only current assets and current liabilities generally are included on the balance sheet. Governmental funds use the modified accrual basis of accounting. Generally, when a liability is incurred (e.g. upon receipt of a valid vendor invoice for payment, etc.), it should be recorded in the appropriate liability account if not paid/ processed for payment on the date of receipt or service rendered, assuming it will ultimately require payment from current resources. The offsetting entry to the recording of the liability/payable in such circumstances would be to the proper expenditure/expense account. The liability/payable account is reversed/cleared for the applicable transaction when processed for payment (with the offsetting entry for payment made to the applicable cash account). If the liability is processed for payment immediately (the day incurred/ invoice for payment received) or within a reasonable period of time thereafter (and prior to being recorded as a liability), the initial expense entry is offset by an entry to the appropriate cash account (reflecting the actual payment amount paid via check, wire transfer, etc.), thus eliminating the need to set up an initial liability/ payable prior to payment. Liabilities incurred and outstanding at the end of a reporting cut-off period should be recognized no later than by the end of such period, along with the related expenditure/expense entries, to ensure proper financial cut-off reporting of both liabilities and expenditures/expenses. Current liabilities represent amounts generally due or payable within one year, i.e. requiring current resources for payment. Examples of current liabilities include: • Current portions of long-term liabilities (see below for overview description of long-term liabilities). • Accounts payable. • Accrued liabilities for payroll related expense. Long term liabilities of the WCBOE represent amounts due or payable after one year and include amounts for items such as the following: • Accrued compensated balances (resulting primarily from accrued annual leave, which is due and payable to employees upon termination of employment). • Capital leases. Long-term liabilities of proprietary funds or trust funds are accounted for through those funds. II. CONTROL OBJECTIVES To ensure: • Recorded balances represent valid obligations of the WCBOE. • Liabilities are recorded timely and accurately. • Subsidiary ledgers are reviewed and reconciled to the general ledger on a periodic basis. • Liabilities are reported in accordance with generally accepted accounting principles. • Compliance with all applicable laws and regulations.