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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
2
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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
5
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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? @ $elps in general
go*ern!ent reporting;
-2
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&udget #lassi+cations
GF!$ 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
-4
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ear-end Processes
First step is to e,tract a trial balance (*B)$odern computerized systems produce *B automatically
A trial balance is a list o all account balances in the general
ledger
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#as% &asis* #as% Flow Statement
Part .
2ash 4o's rom operating acti#ities
Receipts
*a,es 777 777 777!ocial contributions 777 777 777
Grants 777 777 777
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#as% &asis* #as% Flow Statement
Part .
2ash 4o's rom operating
acti#ities3ayments
?ages and allo'ances 777 777 777Goods and !er#ices 777 777 777
1nterest payments!ubsidies 777 777 777Grants@ @ @!ocial benefts 777 777 777
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#as% &asis* #as% Flow Statement
Part /
2ash 4o's rom in#estment acti#ities Ac0uisition o f,ed assets Buildings and structures 000 1n#entories
!trategic stoc"s 000
aluables %on&producti#e assets Land
000 Less proceeds rom sale o assets
%et cash 4o's rom in#estment acti#ities -8
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#as% )asis* #as% 1ow statement-Part 2
2ash 4o's rom fnancing acti#ities
3roceeds rom domestic borro'ing 777
3roceeds rom oreign borro'ing777
Less repayment o borro'ing
%et cash 4o's rom fnancing acti#ities
%et increase decrease in cash
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Accrual &asis - t%e Analytic
Framework
%et operating balance Re#enue – e,pense%et lendingborro'ing %et operating
balance –net ac0uisition o non&fnancialassets
%et 'orth Asset& liability2losing net 'orth
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2-
OPENING
BALANCE
SHEET
Nonfinancial
Assets
Financial
Assets
Liabilities
Net ort!
C!an"es in Net
ort!
F L O S
CLOSING
BALANCE
SHEET
Net ort!
Nonfinancial
Assets
Financial
Assets
Liabilities
TRANSACTIONS
Re#en$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