SUBSECTION 2.2.5.1
SHORT-TERM LIABILITIES

2.2.5.1.1

General

Effective Date:

Sept. 1, 1998

Short-term liabilities are legal obligations which arise upon the receipt of goods or services. In governmental fund type accounts, short-term liabilities are payable from current, available resources. In proprietary fund type accounts, short-term liabilities are obligations payable within one year. Short-term liabilities are accounted for in the GL Code Series 51XX. Refer to 7.2.3.2 of this manual for a description of the various short-term liability general ledger codes.

2.2.5.1.2

Establishing Short-Term Liabilities

Effective Date:

Sept. 1, 1998

2.2.5.2.1.a

The accrual method is used in accounting for the expenditures or expenses of all accounts.

2.2.5.2.1.b

Agencies establish liabilities at the end of each accounting period for the following items by account, appropriation, program, object, and sub-object:

• Utilities - Actual based on vendor invoices, or estimate based on past experience.

• Rentals - Actual based on lease agreements.

• Travel Expenses - Actual based on travel vouchers, or estimate based on past experience or prior approval of travel.

• Payroll Taxes - Actual based on actual payrolls, or estimate based upon prior pay period.

• Salaries and Wages - Actual based on time records, or estimate based upon prior pay period. When accruing salaries and wages, agencies are to also accrue the associated number of Full-Time Equivalent (FTE) staff months.

• All other obligations that have been incurred but not paid.

2.2.5.2.1.c

A Journal Voucher (A7-A) or other authorized source document is to be prepared to record liabilities. (Refer to Section 2.2.5.5.2 for an illustrative entry.)

2.2.5.2.1.d

Liabilities are to be recorded based on the best available information. If the amount of the accrual is known (i.e., the invoice has been received or the amount is otherwise known), the entry is to be made to GL Code 6505 "Accrued Expenditures/Expenses." At the end of the biennium, if the amount is not known, but can be reasonably estimated following the procedures for determining accounting estimates at Section 5.1.2.1.4(d), the entry is to be made to GL Code 6560 "Estimated Accrued Expenditures/Expenses." (Refer to Section 5.1.2.2.5.b and 5.d for illustrative entries.)

2.2.5.2.1.e

Each accrual transaction is to be supported by complete documentation. The use of "dummy" or projected accruals as a method to avoid transfers to reserve or circumvent the allotment process is an improper application of accrual accounting and is not to be practiced.

2.2.5.1.3

Accounts Payable

Effective Date:

Sept. 1, 1998

Amounts owed on open account for the purchase of goods or services are recorded in GL Code 5111 "Accounts Payable - Short-Term." The recording of an account payable represents an acknowledgment on the part of the agency that the goods or services have been received and that an actual liability which must be liquidated at a future date exists. Amounts due to other accounts, other agencies or other governments are not reported in this GL code. Such amounts are reported separately in the GL Code 515X Series.

2.2.5.1.4

Deferred Revenues

Effective Date:

Sept. 1, 1998

Amounts for which asset recognition criteria have been met, but for which revenue recognition criteria have not been met are recorded as Deferred Revenues. Advance grant payments are deferred until qualifying expenditures are made. Additionally, under the modified accrual basis of accounting, amounts which are measurable but not "available" are also deferred. (Refer to Section 2.2.5.5.4 for an illustrative entry.)