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PUBLIC SECTOR ACCOUNTING

Take Home Pre-Final Exam

Written by: Meilisa Nur Sahar 10312399

School of Business and Economics Accounting International Program Universitas Islam Indonesia

1. The fundamental difference of Government Regulation No. 24 Year 2005 with Government Regulation No. 71 Year 2010 lies on the Governmental Accounting Standard (SAP). Government Regulation No. 24 Year 2005 set the accounting for Cash towards Accrual basis (Kas menuju Akrual) and became the transition of Government Regulation since the legislation of Keuangan Negara dan Perbendaharaan Negara mandated that recognition and measurement of income and expenditures should base on accrual basis. On the other hand, Government Regulation No. 71 Year 2010 set the completed SAP for accrual basis which arranged by Komite Akuntansi Pemerintahan (KSAP). Started from paragraph 39 until 42 on Attachment I Conceptual Framework, Government Regulation No. 24 Year 2005 explained about the accounting basis used at that time was cash toward accruals basis. It stated that, basis of accounting used in the governments financial statement is cash basis for the recognition of income, expenditure and financing in the Realization Budget Report (Laporan Realisasi Anggaran) and accrual basis for recognition of assets, liabilities and equities in the Balance Sheet. Cash basis for the Budget Realization Report means that income is recognized when cash is received in the State Treasury/Region or by the reporting entity and expenditures are recognized when cash is removed from the State Treasury/Region or the reporting entity. Reporting entity does not use the term profit. Determination of residual budgetary financing either more or less for each period depends on the difference between actual revenues and expenditures. Revenue and non-cash expenditures such as external foreign aid in the form of goods and services are presented in the Realization Budget Report. Accrual basis in Balance Sheet means that the assets, liabilities, and equity funds are recognized and carried at the time of the transaction or at the time of the incident or the influence of environmental conditions on government finances regardless of when cash or cash equivalent is received or paid. According to Government Regulation No. 71 Year 2010, Accrual based SAP is SAP which recognized revenue, expenses, assets, liabilities and equity in the accrual based financial reporting, as well as to recognize the income, expenditure and financing in the Realization Budget Report on the basis which set out in the Anggaran Pendapatan dan Belanja Negara/ Anggaran Pendapatan dan Belanja Daerah (APBN/APBD). The use of accrual basis in SAP is explained in the Government Regulation No. 71 Year 2010 started from paragraph 42 until 45 on Attachment I Conceptual Framework. It stated that, basis of accounting used in the government's financial statements are the accrual basis, for the recognition of income - Operational Reports (Laporan Operasional), expenses, assets, liabilities, and equity. In terms of legislation requiring financial statement presents the cash basis, the entity shall present such report. Accrual basis for Operational Reports means that income is recognized when the right to earn income has been fulfilled even though cash has not been received in

the State Treasury/Region or by the reporting entity and expenses are recognized when liabilities that result in decrease in net worth has been fulfilled even if the cash has not been removed from the State Treasury/Region or the reporting entity. Income from outside/foreign assistance is also presented in the form of services in Operational Reports. In terms of the budget is prepared and implemented based on the cash basis, the Budget Realization Report prepared on the cash basis, meaning that the income and financing revenue is recognized when cash is received in the State Treasury/Region or by the reporting entity, as well as expenditures, transfers and expenditures financing are recognized when cash is removed from the State Treasury/Regions. However, when the budget is prepared and implemented based on the accrual basis, the Report of the Budget Realization prepared on the accrual basis. Accrual basis in Balance Sheet means that the assets, liabilities, and equity are recognized and carried at the time of the transaction, or at the time of the incident or environmental effect on the financial condition of the government, regardless of when cash or cash equivalent is received or paid. 2. Actually the reason why Government Regulation No. 24 Year 2005 need to be replaced is stated on Government Regulation No. 71 Year 2010, Implementation of Government Regulation No. 24 of 2005 is still tentative as mandated in Article 36 paragraph 1 of Law No. 17 Year 2003 on State Finance stating that during the recognition and measurement of accrual-based income and expenditure has not been implemented, the use of cash-based recognition and measurement. Recognition and measurement of income and expenditure accrual basis in accordance with Article 36 paragraph 1 of Law No. 17 of 2003 be implemented no later than 5 (five) years. Therefore, Government Regulation No. 24 of 2005 needs to be replaced. After all, financial statements resulting from the adoption of Accrual-Based SAP are intended to provide better benefits for all stakeholders, both users and government inspectors financial statements, compared to the costs incurred. This is in line with one of the accounting principles that the costs are outweighed by the benefits gained.