Finance and Accounting
Finance and Accounting tests double-entry fund accounting, the obligation-to-outlay lifecycle, and the financial statements a federal entity must produce. Questions typically ask what an event does to the budgetary or proprietary accounts, and which statement reports it.
Two sets of accounts
Budgetary accounts track authority and its use: budget authority, apportionment, commitments, obligations, outlays. Proprietary accounts track assets, liabilities, and net position. Every transaction hits both under the U.S. Standard General Ledger, so the books stay in balance and reconcile to Treasury.
Lifecycle terms
- Commitment: an administrative reservation of funds before a definite obligation.
- Obligation: a definite commitment creating a legal liability, recorded when a contract is awarded or an order is placed.
- Accrued expenditure: goods or services received but not yet paid.
- Outlay: cash disbursed by Treasury. Undelivered orders are obligations for goods not yet received; accounts payable arise when goods are received but unpaid.
Statements
The Balance Sheet; the Statement of Net Cost; the Statement of Changes in Net Position; the Statement of Budgetary Resources, which reconciles budgetary resources to obligations and outlays; and the Statement of Custodial Activity for collections held for others. Working capital and revolving funds, such as the Defense Working Capital Funds, bill customers for goods and services and must recover full costs.
Worked example
A unit obligates $1,000,000 for spares. By year end, $250,000 of spares have been delivered and accepted and $200,000 has been paid. The records show a $750,000 undelivered order balance, a $50,000 accounts payable, and $200,000 of outlays. Budgetary resources were consumed by the full $1,000,000 obligation, but cash left Treasury for only $200,000 - showing why obligation rates and outlay rates are tracked separately.
Traps
Treating obligation as outlay; recording an obligation before apportionment or without funds certification; confusing reimbursable orders with direct appropriations; and assuming accounts payable and undelivered orders are the same thing.