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PRINCIPLES OF ACCOUNTINGIN NEW ACCOUNTING MODEL
23rdDecember, 2015
Management & Professional Development Department
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LEGACY SYSTEM OF ACCOUNTING
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The accounting system was ased on accounting
chart, under which the e(penditure was representedy the numeric numers and receipts were also
represented y the numeric numers ut written in
roman language
)etailed e(penditure was recorded as*
!ay of +fficers
!ay of other staff
Allowances andTA
!+ and
+ther contingent e(pend
LEGACY ACCOUNTING SYSTEM
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The accounting system was not reviewed % revised
vis--vis International /tandards till 190 )uring 1901 the chart was replaced with chart of
classification comprising two elements vis* 2unction
and +ect, as the previous chart was not
compactile with computeri#ed environment The new chart of classification too could not
produced results as per international standards
4onsidering the room for improvement and direneeds, during early ninetys the 2ederal Government,
with the technical assistance of the 6orld 7an",
launched a proect "nown as !roect to Improve
2inancial $eporting 8 Auditing &!I2$A'
LEGACY ACCOUNTING SYSTEM
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The !roect hired international accounting firms as
consultants to review the e(isting system ofaccounting and to suggest improvements % changes
where necessary
The 4onsultants proposed entirely a new system of
accounting and conseuently udgeting, "nown as:ew Accounting ;odel &:A;'
The :A; was reviewed y a committee of e(perts,
comprising memers from each province and federal
government
As a pilot the :A; was introduced in Aotaad
district during 2< =3-> and in ?!, AG!$ during
2< =5-@. it was introduced in !una and other
provinces during 2< =5-@
LEGACY ACCOUNTING SYSTEM
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NEW ACCOUNTING MODEL
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IMPLEMENTATION OF NAM
Article 170 of the Constitution empowers the AuditorGeneral of Pakistan to prescribe the form and manner
for keeping the accounts of the Federation, Provinces
and istrict Governments! Accordingl", #ew
Accounting $odel %#A$& has been prescribed and
implemented with the approval of the President of
Pakistan
As the accounts follow the budgetar" allocations,therefore, from the F' (00)*0+ the Punab adopted the
#A$ for -udget, both for the Provincial and istrict
Governments
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NEW ACCOUNTING MODEL
OBJECTIVES.
/he #A$ envisages to ensure good governance and
accountabilit" through
Accurac"
Completeness
eliabilit", and
/imelines
in Government2s financial reports at Federal, Provincial,
istrict and 3ub*district levels! /he information generatedin computeri4ed environment under #A$ would provide
direct support to Public Financial $anagement,
Accountabilit" and 5egislation oversight
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SALIENT FEATURES $odified Cash -asis of Accounting
ouble 6ntr" -ook eeping
Commitment Accounting
Fi8ed Assets Accounting
Assets egister
#ew Chart of Accounts
NEW ACCOUNTING MODEL
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eceipts will continued to be recorded on cash basis
Pa"ments will also be recorded on Cash -asis,however, certain payments will be recore oncommitment basis
Commitment is defined as an obligation to make
future pa"ments, and are recorded when an entit"issues a legall" binding purchase order or enters intocontract for provision of !oos an ser"ices!Commitments are booked against funds available inrelevant obect! /he recording of commitments istermed as modified basis of accounting
Commitments shall have a t#res#olvalue in termsof upee or percentage of allocation before these arerecogni4ed
Modifed Cash Basis o Accou!i"
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CO$$IT$ENT ACCOUNTIN%
Commitments honoured during a financial "ear shallstand finali4ed
9utstanding commitments at the end of a financial
"ear shall lapse but after due scrutin" b" A : AGand F, valid commitments would be reinstatedthrough budgetar" allocations during the ne8tfinancial "ear!
Commitment accounting provide financial managerswith a tool to measure and forecast spending
performance against budgetar" allocations ; avoidoverbooking of e8penditure in a particular period!
Modifed Cash Basis o Accou!i"
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&o'ble Entry Boo( )eepin! * "is+,+"is Sin!le Entry
Modifed Cash Basis o Accou!i"
Sin!le Entry Boo()eepin!
&o'ble Entry Boo()eepin!
3ingle 6ntr" 3"stem is a
s"stem of book*keepingwhich does not record orgive effect to the two foldaspect of each and ever"
transaction!
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&o'ble Entry Boo( )eepin! * "is+,+"is Sin!le Entry
Modifed Cash Basis o Accou!i"
Sin!le Entry Boo()eepin!
&o'ble Entry Boo()eepin!
>n this s"stem generall" Cash
-ook and books to recordpersonal accounts are onl"maintained, it is not reall" as"stem because under thismethod there ma" not be
recorded some of thetransactions and partiall"record some others
/he accounts which receive
the benefit are debited and theaccount which gives thebenefit is credited! >t is theultimate result of this s"stemthat ever" debit must have a
corresponding credit and viceversa! 9n a particular da" thetotal of the debit entries andthe credit entries of variousaccounts must be e?ual
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Fi8ed assets are ph"sical in nature such as buildings,
plants and e?uipment etc!, the" have strategic longterm value
Control of fi8ed assets is an important feature ofefficient financial management! >t involves accurate
reporting of Asset purchase
isposal ; transfers
5osses through misuse:theft
Government departments are re?uired to maintain a-i.e asset re!ister containing details of cost,location, date of purchase etc!
A fi8ed Asset egister is maintained b" the 3AP:*@
FI#ED ASSET ACCOUNTING
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/he Chart of AccountsB provides a frameworkB for
organi4ing accounting transaction and to provide anumber of views of a particular transaction!
/he various views are indicated with elements
comprising of alpha and numeric characters!
/he chart of accounts applies to all accounting entities
and contains following five elements
/0 Entity
10 F'nction
20 Ob3ect
40 F'n
50 6ro3ect
C$ART OF ACCOUNTS
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ENTITY ELEMENT
The entity means the organi#ational structure or
unit which create the transactions.
The organi#ational highest level is Government 8
lowest level is )rawing 8 )isursing +fficer &))+'%
4ollecting +fficer &4+'
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ENTITY ELEMENT CODES
! 5 Agriculture )eptt. 51 Agriculture
5= )G Agri. &B(tension'
53 )G Agri. &2ield'
5> )G Agri. &$esearch'
55 )G Agri. &6ater;anagement'
! 51 4; /ecretariat 5=5 4; /ecretariat
! 5= 4; InspectionTeam
55 4; Inspection Team
! 53 4olonies )eptt. 5C5 4olonies )eptt.
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ENTITY ELEMENT CODES
! 5> 4ommunication
8 6or"s )eptt.
51 4ommunication 8
6or"s
511 4hief Architect,!una
51= 4hief Bngineer7uilding &:orth'
513 4hief Bngineer7uilding &/outh'
51> 4hief BngineerDighways &:orth'
515 4hief BngineerDighways &/outh'
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FUNCTION ELEMENT
The economic function, relating to the provision of
a particular service, activity or Government
program. The function code have een designed
conforming to I;2 pulic sector reporting
reuirements
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FUNCTION ELEMENT % CODES
1 General !ulic /ervice
= !ulic +rder and /afety Affairs
3 )efense Affairs
> Bconomic Affairs
5 Bnvironment !rotection
@ Dousing and 4ommunity Amenities
C Dealth
0 $ecreation, 4ulture and $eligion
9 Bducation Affairs and /ervices
1 /ocial !rotection
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FUNCTION ELEMENT $IERARC$Y
The 2unction Blement is further divided into followingcomponents*
Major Function
Minor Function
Detailed Function
ub!Detailed Function
Programme
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FUNCTION ELEMENT % E#AMPLE
An e(ample of the 2unction Blement is shown as under*
;aor 2unction 1 General !ulic /ervices
;inor 2unction 11 2inancial 8 2iscal Affairs
)etail 2unction 11= 2inancial 8 2iscal Affairs
/u )etail 2unction 11=> Administration of
2inancial Affairs
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OB&ECT ELEMENT
The accounting classification, descriing the item
of e(penditure, receipt, asset or liaility. Bach
accounting classification is further su-divided
into a hierarchy, down to the level of detailed
oect head.
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OB&ECT ELEMENT % CODES
A 1 Bmployee $elated B(penses
A = !roect !re-investment Analysis
A 3 +perating B(penses
A > Bmployees $etirement 7enefits
A 5 Grants, /usidies and 6rite off of oans %Advances % +thers
A @ TransfersA C Interest !ayment
A 0 oans and Advances
A 9 B(penditure on Acuiring of !hysical Assets
"#penditure
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OB&ECT ELEMENT % CODES
A 1 !rincipal $epayments of oans
A 11 Investments
A 1= 4ivil 6or"s
A 13 $epairs and ;aintenance
A 1> /uspense and 4learing
"#penditure
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OB&ECT ELEMENT % CODES
$a#!%eceipts
7 1 )irect Ta(es
7 = Indirect Ta(es
7 3 +ther Indirect Ta(es
on $a#!%eceipts
4 1 Income from !roperty and Bnterprise
4 = $eceipts from 4ivil Administration and+ther 2unctions
4 3 ;iscellaneous $eceipts
%eceipts
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OB&ECT ELEMENT % CODES
'apital %eceipts
B 1 $ecoveries of Investment
B = $ecoveries of oans and Advances
B 3 )et(ssets
2 1 4ash and 7an" 7alances
2 = $eceivales
2 3 !hysical Assets
2 > Investments
2 5 +ther Assets
%eceipts
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OB&ECT ELEMENT % CODES
)iabilities
G 1 4urrent iailities
G = oans
G 3 )eferred iailities
G > +ther iailitiesG 5 4ontrol Accounts
G @ Trust Account-2und
G C Trust Account-!ost +ffice
G 0 Trust Account-$ailways
G 9 Trust Account-T8T
G 1 Trust Account-+ther
G 11 /pecial )eposit Investment
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OB&ECT ELEMENT % CODES
G 1= /pecial )eposit 2und
G 13 /pecial )eposit Grant
G 1> ;int Account
Buity
D 1 Buities
)iabilities
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OB&ECT ELEMENT%% E#AMPLE
Accounting Blement A E B(penditure
;aor +ect A1-Bmployee related e(penses
;inor +ect A11 -!ay
)etailed +ect (01101! *asic Pa+ of fficers
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FUND ELEMENT
The pool of money from which udgetary
allocation is made &e.g. 4onsolidated 2und', and
is further su-divided into grants &in the case of
4onsolidated 2und' or !ulic Account detailed
heads.
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F-D
2un d could e either consolidated or !ulicAccount .' & P/
-%'"
This indicates the source of 2und from where the
e(penditure is eing met. This could e 4apital or
$evenue, denoted y 1or 2
-*!F-D
This indicates whether the e(penditure is voted %charged. This also indicates whether the e(penditure
is 4urrent, )evelopment or 4apital in nature
FUND ELEMENT
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FUND ELEMENT
' 'onsolidated
Fund
'apitalFoted 4urrent B(penditure
%evenue
Foted )evelopment B(penditure
Foted 4apital B(penditure
4harged 4urrent B(penditure
4harged )evelopment B(penditure
4harged 4apital B(penditure
! Public (ccount
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SUB'FUND ( SUB%ELEMENT
The different /uE2und % /uEBlements of 4onsolidated
2und are as follows
1 Foted 4urrent B(penditure
= Foted )evelopment B(penditure
3 Foted 4apital B(penditure
> 4harged 4urrent B(penditure
5 4harged )evelopment B(penditure
@ 4harged 4apital B(penditure
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FUND ELEMENT % E#AMPLE
2und 4 - 4onsolidated 2und/ource = E $evenue, 1-4apital
/u 2und 1 - Foted current e(penditure
Grant :umer 10 - Agriculture
2und :o. !4 =110- Agriculture.
&!$+FI:4IA'
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GRANT NUMBER
It is indicated y 3 :umeric 4haracters for !rovincial
Government and = :umeric characters for )istrict
Governments
PROJECT ELEMENT
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!roect is indicated y > :umeric characters,
allotted to each )evelopment !roect. The proect
element enales transactions to e aggregated
and reported at a proect level. Bach proect will
have a uniue proect numer
PROJECT ELEMENT
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GRANT NUMBERS FOR DE)ELOPMENT
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GRANT NUMBERS FOR DE)ELOPMENTCAPITAL E#PENDITURE
4apital Account is, accommodated under the relevant
minor%detailed function under the following grants -
!4 1=3C-Irrigation 6or"s.
!4 1=30-Agricultural Improvement and $esearch.
!4 1=39-Industrial )evelopment.
!4 1=>-Town )evelopment.
!4 1=>1-$oads and 7ridges.
!4 1=>=-Government 7uildings.
!4 1=>3- oans to ;unicipalities.
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FUNCTIONAL ARRANGEMENT
01 GENERAL PUBLIC SERVICE
011 EXECUTIVE & LEGISLATIVE ORGANS,FINANCAL
0112 FINANCIAL AND FISCAL AFFAIRS
011205 TAX MANAGEMENT (CUSTOMS. ITAX. EXCISE) AND TAXATION DEPARMENT
LQ401 S!"#$%'###
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Tha* You