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Financial Statement Basics
3 Basic Statements for University Reporting
by Public Institutions

All Three Reports tie together in some way!!

  1. Statement of Net Assets = Balance Sheet
  2. Statement of Revenues, Expenses and Changes in Net Assets = Statement of Changes in Fund Balance
  3. Statement of Cash Flows

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Basic Accounting Principles
The Balance Sheet Equation:
Assets = Liabilities + Fund Balance
  • Matching Principle: Requires that Revenues and Expenses be matched

  • Realization Principle: Revenues are recognized when earned. (Revenues received ahead of time are deferred until such time as the earnings process is complete)

  • Expenses must be charged to the period when the expense was incurred regardless of when the bill was paid

  • University rule regarding expense accrual: If goods are received or services are rendered by June 30, they MUST be charged to the fiscal year just ended.
    • For 3-way match purchase orders, an accrual is automatically made for goods received by June 30.
    • For 2-way match purchase orders, ordering department is asked to provide information as to whether goods or services were received by June 30.
    • When accruing for an expense, the account is charged and a payable is set up.

  • Exceptions
    • If the shipping terms were FOB Shipping Point, the critical date is the date goods were shipped, not received because that is when the University took title to the goods.
    • A threshhold is set annually, under which an accrual is not necessary.

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