government-accounting-framework (1).pptx

8/17/2019 government-accounting-framework (1).pptx

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Sailendra Pattanayak, FADInternational Monetary Fund

Government

Accounting Framework


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Key Elements of an Accounting Framework

Accounting basis – cash or accrual

Budget classifcation and chart o accounts

General Ledger and subsidiary records

Accounting process (manual or computerized) andoutputs

Accounting policies

Reporting entity

Financial statementsreports

!"illed personnel is important resource to implement theabo#e

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Accounting Framework in a y!ical "I# $

Main Issues$anual boo" "eeping

%o ledger&based double entry system

Lac" o a comprehensi#e chart o accounts (or adetailed coding system 'ith #arious segments)

!ubstantial delay in annual accountspreparation

Lac" o clarity on the reporting entity conceptor consolidation o annual accounts

Lac" o clear methodology and accountingpoliciesstandards or fnancialstatementsreports

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#as% &asis Accounting

*ransactions are recognized only 'hen therelated cash receipts and payments occur

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Accrual &asis AccountingFlo's are recorded at the time economic #alues are created+

transormed+ e,changed+ transerred+ or e,tinguished –GF!$ -../

A basis o accounting under 'hich transactions and othere#ents are recognized 'hen they occur (and not only 'hencash or its e0ui#alent is recei#ed or paid) & 1FA2 3ublic!ector 2ommittee

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&asis of 'ecording GovernmentFinancial (!erations

#as% )ased accounts* Re#enue e,penditure transactions are recognized only

'hen cash 4o' results 1gnores liabilities until due or payment 1gnores non&cash operations altering stoc" o go#ernment

assets andor liabilities %eeds to be supplemented by memoranda items to bring

to light economic 4o's escaping the accounts

Accrual )ased accounts*

5conomic 4o's are recorded at the time economic #alue iscreated, transformed, exchanged, transferred, or

extinguished. All economic 4o's (not 6ust cash 4o's) are recorded7

At the heart o accrual based accounts are the criteriaadopted or recognizing an economic ow7

1mprecise and non&transparent recognition criteria 'illcompromise the integrity o accrual based accounts


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&asis of 'ecording GovernmentFinancial (!erations

Modi+ed Accrual )ased Accounts*

*he term modied accrual basis, no longer defned as aormal+ distinct accounting basis+ is generally used to implyrela,ed standards or recognition o economic 4o's7

$odifed accrual basis is commonly employed8 *o enhance cash based accounting by accounting or

certain operations li"e e,penditure commitments beorecash 4o' results

*o pro#ide a migration path rom cash&based to accrualbased accounting systems

Modi+ed #as% )ased Accounts*

*his term is used to describe accounting systems under'hich cash&based accounts are 9"ept open: or somedaysmonths beyond the close o the year to ta"e on board

transactions in pipeline at the time o year&end


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Accounts Kee!ing Process and (ut!uts

STEPS RECORDS

Post

General

Ledger

Post

Subsidiary

Ledgers

Prepare Trial Balance

Prepare Financial Statements

Prepare Correction Entrees

Collect Source ocu!ents

"" #ouc$ers

"" Ban% State!ents

"" Trans&er entrees

'ecord in (ournalsGeneral ) Special (ournals

General Ledger

Subsidiary Ledgers

Trial Balance

aily ban% state!ents

'egister o& c$ec%s

Pay!ent *ouc$ers

'e*enue receipts

Trans&er entrees

Consolidated +inancial State!ents


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Government Financial Statements

Annual Go#ernment Financial !tatements

Final Go#ernment accounts duly certifed by theindependent !upreme Audit 1nstitution (!A1)+ together 'itha comprehensi#e audit report on the regularity+ integrity+and propriety o go#ernment fscal operations

Go#ernment accounts should+ at the minimum

consist o 8 ;nder cash based accounting8

!tatement on sources+ allocations+ and use o cash resources –Finance Accounts

!tatement on appro#ed budget estimates and actuals –Budget 5,ecution AccountsAppropriation Accounts

;nder accrual based accounting8 !tatement o Go#ernment


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#%art of Accounts

Countries do not al/ays $a*e a c$art o& accounts

T$at !eans t$at t$ey do not $a*e a proper general

ledger syste!

0ccasionally1 so!e transactions are recorded in onesyste!1 and ot$er transactions are recorded in

anot$er syste!

it$out a C0 and ledger syste!1 t$e accounting

&ra!e/or% can be considered to be lac%ing in basicaccounting discipline and controls

T$e reliability and accuracy o& t$e accounting syste!

can be in doubt


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#%art (f Accounts $ w%at it is

Logical &ra!e/or% &or recording and reporting&inancial in&or!ation

odern syste!s include budget classi&ication &ully inC0

C0 can acco!!odate progressi*e !o*e to accrualaccounting

sset and liability accounts in addition to re*enue andepense accounts

T$e C$art o& ccounts needs to !eet t$e business

reuire!ent o& t$e Go*ern!entC0 &or!s core o& t$e in&or!ation to be generated

and trac%ed in a G+S


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&udget #lassi+cation and #%art of Accounts

BC re*enue1 ependiture 9 borro/ings

C0 BC : asset1 liability and euity accounts

C0 also includes any internal !anage!entclassi&ication suc$ as depart!ents1 cost centers1 regions;

GFSM 2..- s$ould be &ollo/ed /$en de*eloping budget

classi&ication

il1 ndia? @ $elps in general

go*ern!ent reporting;

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&udget #lassi+cations

GF!$ re0uires 5conomic and Functional2lassifcations!alary+ goods and ser#ices+ grants+ subsidies

are economic classifcations

5ducation+ health+ deense+ are unctions


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Account y!e

Re#enue and e,pense type

Asset+ liability type

%et&'orth50uity typeRe#enue and e,pense accounts are netted o>

at year&end and the surplusdefcit istranserred to %et&'orthe0uity

Asset liability account balances are carriedor'ard to ne,t year

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ear-end Processes

First step is to e,tract a trial balance (*B)$odern computerized systems produce *B automatically

A trial balance is a list o all account balances in the general

ledger


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#as% &asis* #as% Flow Statement

Part .

2ash 4o's rom operating acti#ities

Receipts

*a,es 777 777 777!ocial contributions 777 777 777

Grants 777 777 777


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Part .

2ash 4o's rom operating

acti#ities3ayments

?ages and allo'ances 777 777 777Goods and !er#ices 777 777 777

1nterest payments!ubsidies 777 777 777Grants@ @ @!ocial benefts 777 777 777


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Part /

2ash 4o's rom in#estment acti#ities Ac0uisition o f,ed assets Buildings and structures 000 1n#entories

!trategic stoc"s 000

aluables %on&producti#e assets Land

000 Less proceeds rom sale o assets

%et cash 4o's rom in#estment acti#ities -8


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#as% )asis* #as% 1ow statement-Part 2

2ash 4o's rom fnancing acti#ities

3roceeds rom domestic borro'ing 777

3roceeds rom oreign borro'ing777

Less repayment o borro'ing

%et cash 4o's rom fnancing acti#ities

%et increase decrease in cash


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Accrual &asis - t%e Analytic

Framework

%et operating balance Re#enue – e,pense%et lendingborro'ing %et operating

balance –net ac0uisition o non&fnancialassets

%et 'orth Asset& liability2losing net 'orth


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2-

OPENING

BALANCE

SHEET

Nonfinancial

Assets

Financial

Assets

Liabilities

Net ort!

C!an"es in Net

ort!

F L O S

CLOSING

BALANCE

SHEET

Net ort!

Nonfinancial

Assets

Financial

Assets

Liabilities

TRANSACTIONS

Re#en$e

E%pense

= AT 0P'TAG

BLAC

minus

Nonfinancial

Assets AT LAAG)

B0''0AG

minus

Liabilities

Financial

Assets• cas!

• ot!er financial assets

minus

OTHER ECONO&IC

FLOSHol'in" Gains

( Losses

Ot!er C!an"es in

t!e )ol$me of Assets

Nonfinancial

Assets

Financial

Assets

Liabilities

Nonfinancial

Assets

Financial

Assets

Liabilities

GFSM 2001

ANALYTIC

FRAMEWORK


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GFSM /33. Statements

!tatement o Go#ernment


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GFSM /33. Analytical &alances

!tatement o Go#ernment


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Thank you

government-accounting-framework (1).pptx

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