Question

Saudi government approves the operating budget for the general fund, providing for 1200 billion SR in revenue and 1000 billion SR in expenditures. What is the journal entry to record that transaction?

A. Dr. Estimated revenues control 1200, Cr. Appropriation control 1000, Cr. Budgetary fund balance 200.
B. Dr. Appropriation control 1000, Dr. budgetary fund balance 100, Cr. Estimated revenues control 1200.
c. Dr. Encumbrance control 1000, Dr. budgetary fund balance 100, Cr. Estimated revenues control 1200.
D. Dr. Expenditure’s control 1000, Dr. budgetary fund balance 100, Cr. Estimated revenues control 1200.

Answer 1

The correct journal entry for the Saudi government's approved operating budget is a debit to Estimated Revenues Control for 1200 billion SR, a credit to Appropriations Control for 1000 billion SR, and a credit to Budgetary Fund Balance for 200 billion SR to reflect a surplus.

Step-by-step explanation:

When the Saudi government approves an operating budget with 1200 billion SR in revenue and 1000 billion SR in expenditures, the journal entry to record this transaction would reflect a budgetary fund balance, which is the difference between the estimated revenues and the appropriations. The correct entry is to debit Estimated Revenues Control for 1200 billion SR, credit Appropriations Control for 1000 billion SR, and credit the Budgetary Fund Balance for 200 billion SR, because the revenues exceed the expenditures by 200 billion SR. Therefore, the journal entry is

• Dr. Estimated Revenues Control 1200 billion SR
• Cr. Appropriations Control 1000 billion SR
• Cr. Budgetary Fund Balance 200 billion SR

This entry is representative of the government planning for a budget surplus, where the expected revenues are higher than the appropriations, indicative of positive financial management.