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CHAPTER 5: FINANCIAL ACCTG CONCEPTS & PRACTICE - Coggle Diagram
CHAPTER 5: FINANCIAL ACCTG CONCEPTS & PRACTICE
PSA
Def: A systematic recording, reporting and analysis of financial transactions of a gov department, following a set of rules.
Accountant General MAS:
Principle gov accountant + head of accounts division of Treasury
SPECIFIC LEGISLATION FOR
CONSOLIDATED FUND
My Fed Const 1957 (Article 97(1)):
Regulate receipt and disbursement
Financial Procedure Act (Section 7)
3 separate consolidated accounts:
Cons Rev Acc
Cons Loan Acc
Cons Trust Acc
Financial Procedure Act (Section 9)
Trust Accounts requirements
Financial Procedure Act (Section 11)
Contingency fund requirement
Federal Treasure Circular (No 1.1/2013)
Code of Acc for all rev & exp objects
MPSAS 23
Guideline for recognition and treatment of non-exchange transactions
MPSAS 9
Guidelines for recognition and treatment of exc transactions under accrual based acctg
OVERVIEW OF CONSOLIDATED FUND
PURPOSES & OBJECTIVES OF PS FINANCIAL ACCTG
To meet legal requirements
Ensure transactions are legitimate by comply with the established requirements
Provide evidence of accountability & stewardship
All public sector org must display due diligence and sense of probity in the collection and disposal of public funds
Ensure objective & timely reporting
Users of PSA want to know what gov is doing
CHARACTERISTICS OF PS FINANCIAL ACCTG
High incidence of non-exchange transactions
An entity receives benefit from other entity w/out giving equal value
Gov's main source of revenue is through taxation
A legally mandated involuntary transaction between ind / business - gov
Primary reason to hold PPE is to provide goods and services to citizens
Generate positive cash flows isn't the main reason
Gov often have rights to natural resources
Gov can grant licenses or obtain royalties and taxes
Users need broader information to make good decision
*Eg: Gov's source of funds to finance its activities
NATURE OF PS FINANCIAL ACCTG
Legal requirements & procedures
Every decision made must comply with the related legal requirement
Period receipts & disbursement allocation
Nature of receipts are recurring & do not result in a future obligation.
The benefit from all disbursements will expire in the year of disbursement are made.
Funds expended by government to acquire land, productive facilities & others are charged as expenditure in the year of disbursement.
assets recorded in the accounts are limited to cash and bank balances.
Full disclosure
Disclose each classification of rev & exp associate with specific fund.
Objectivity & historical cost
Basis of valuation: historical cost
Cash budget to cash acctg
Show the sources, allocation and use of resources.
FEATURES OF PS FINANCIAL ACCTG
Budgetary Acctg
Method to track money that includes both planned and actual amounts - can always see how much of the planned money is still available.
Fund Acctg
The resources of rev are segregated based on fund / purpose.
Each fund is capable on its own as an independent acctg entity.
Grouped in 3 main accounts:
CRA
CLA
CTA
Vote acctg
Revenues and payments are account into consolidated account.
Spending can only take place if specifically authorized .
All the spending is authorized on annual basis (budget) and unspent balances at the end of the year are returned back to consolidated fund.
Spending is authorized for a specific purposes & virement procedure need to be approved
BASIC CONCEPTS IN PSFA
Consolidated fund
All rev must enter into consolidated fund
Manage into 3 consolidated accounts
CRA
Account where the gov collects money, and it's used to cover its day-to-day expenses.
CLA
Account where all the money coming in and going out for repaying loans and transferring to other funds is kept track of.
CTA
Account where the government keeps track of all the money it receives and spends for specific purposes and trust funds.
ACC CLASSIFICATION SYSTEM
Separation of rev, trust and loan acc
Use of objects and sub-objects
Statutory exp authority
Revenue characteristics
Responsibility center / function
Object of exp
Initial grouping of objects of exp
Moving estimate
Financial report
ACCTG BASIS
(Timing of transactions & event being recognized)
Cash basis
Transactions are recorded when there is actual cash flow
Modified cash basis
Recognizes transactions and events which have occured by year-end
Commitment basis
Records anticipated exp evidenced by contract or purchase order.
Modified accrual basis acctg
Recognize rev when they are both measurable & available
Record exp on full accrual basis
Accrual basis
Recognize transactionswhen they become due
RECOGNITION
A process in determining the date (when) and the amount (RM) of any transaction being appear in the accounting book.
REVENUES are recognized in the period as the amounts are received during the year.
EXPENDITURES are recognized in the year if three conditions are met:
payment order get before 31st December.
Accountant gets the payment order on January the 10th.
Payment is made by before January the 15th
FIXED ASSETS AND LONG TERM LIABILITIES are not recognized
RECORDING TRANSACTIONS
(Process of recording the transactions in ACCOUNTING BOOK)