1. Define Governmental Accounting?

And according to
Egyptian law?
Answer

Governmental accounting as an important branch of accounting

(information system) provides information to national decision
makers to manage public expenditures and how to finance these
exp.

In Egypt, According to Law no. (127) year 1981:

Is group of rules which are applied in governmental units for preparing and
implementing the state budget , and for recording and classifying financial
transactions made by these units to prepare financial statements and
accounts.

What are The differences between B.S (in financial acc.)

and S.B. (in governmental acc.)?
Point of comparison Balance sheet State Budget

Definition A financial statement A financial statement

that indicates what that indicates the
assets a firm owns expenditures
and how those assets necessary to achieve
are financed at a the national tasks,
certain time period. and the resources
expected to be
collected during the
following year.

Point of comparison Balance sheet State Budget

Components Includes both assets Includes both estimated

and liabilities. expenditures and
resources
All financial data All financial data
included represents included represents
Time horizon estimated data.
actual data.

2. What are Objectives of Gov. Acc.?

The main and sub-objectives
 Provide information necessary for faithful, efficient and economical
management of an operations and resources ( relates to
management control)

Provide information to enable managers to report on the discharge

of their responsibilities to administer effectively the programs and
use of resources (accountability)

monitoring performance under terms of legal.

planning and budgeting

3. What are objectives of State Budget?

Answer

1- Improving the role of the budget as an efficient planning tool :

S.B. can be considered as a national financial policy tool

So, the budget deficit (resources < expenditures) can be managed in 2

ways

To be an efficient deficit management

R a t io n a liz in g a n d
M o n it o r in g n a t io n a l
e x p e n d it u re
R u le s f o r e s t im a t io n o f s t a t e u s e s :
U s in g ( IT ) t o e n s u re a c c u r a c y o f e s t im a t io n
S t u d y in g a n d a n a ly z in g a c t u a l e x p e n d it u r e s
in t h e la s t 3 y e a r s .
F e a s ib ilit y s t u d ie s o f s t a t e p ro je c t s
M a in t e n a n c e o f t h e s t a t e a s s e t s t o in c re a s e
t h e e ffi c i e n c y o f p e r f o r m a n c e .

In c re a s in g n a t io n a l
re s o u rc e s
c o lle c t e d r e s o u rc e s <
e s t im a t e d re s o u rc e s : t h e re is
2 re a s o n s
1 - In a b ilit y t o a d d n e w in c o m e
( in c r e a s e s c o p e o f t a x ) .
2 - in a b ilit y t o c o lle c t e s t im a t e d
ta xe s .
f a c t o r s t o m i n i m i z e d e fi c i t :
R e e v a lu a t in g ta x s y s t e m (t a x
r a t e s , c a t e g o r ie s , a n d
a llo w a n c e )
In t r o d u c in g n e w id e a s fo r
in c r e a s in g s t a t e re s o u rc e s a n d
r a t io n a liz in g e x p e n d it u r e s .
E n h a n c in g t h e a b ilit y t o c o lle c t
t h e s t a t e a c c r u a ls .

2- Supporting decentralization and maximizing the role of local authorities

Decentralization :means that the authority is passed to lower

level where there is less monitoring of employee decision making
and performance.

The advantages of decentralization and maximizing the role of local

authorities:
- More accuracy in applying the principle of comprehensive budget (S.B.
will be more acceptable to public and employees).

- Reducing the dependency of the local authority on the S.B. (general

treasury), especially the deficit.

3- Increasing the efficiency of using inventories

To achieve optimum level of investment in inventory, there are 2

requirements:

-insure that inventory are sufficient to meet requirements

- Avoid holding excess inventory to avoid obsolescence.

4. Improving the quality of products will increase exports Rationalization of

imports will lead to:

- Reducing the deficit of trade balance

- Reducing the demand for foreign currency.

- Create new job opportunities.

4. What are Elements of Gov. Acc. ?

Gov. Acc. Includes:

- Rules for preparing and implementing S.B.

- Recording and classifying financial transactions.

- Preparing both financial statements and accounts and analyzing

financial data.

- Financial control (gov. acc. Tools for control)

5. What are Features of Gov. Acc. In Egypt?

Cash acc. Basis is used for resources and expenditures.

Depreciation is not computed.

No calculation for provisions and reserves.

No Balance sheet is prepared.

 6. What are the budgeting principles ?
Answer

1-Transparency and accountability

The inclusion of transparency and accountability, requiring that

decisions,results and the costs, be accessible, clear and
communicated to the wide community.

Transparency requires that the decision makers have all relevant

information available when they make decisions.

Accountability refers to the responsibility of someones actions to

someone else.

2- Annual budget principle

Attempts of parliament to exercise control over the activities of

central gov.

Expenditure have to be approved for each financial year by

parliament.

3- Comprehensive budget principle

Including all expenditures and resources of the state in S.B.

Enables the state to utilize all resources available during the

budgetary year in the best use.

.4- Unity of budget principle

Budgets of all gov. units are aggregated in one budget (S.B.) .

This principle can be observed through the aggregation process of

the budget of the gov. units.

So, S.B. must include all revenues & expenditures for all gov. units.

5- Balanced budget principle

It refers to the equality of estimated expenditures and estimated

resources.

* In case of inequality (where deficit exist) the gov. has to follow one or
both of these alternatives:

- Reduce the state expenditures or delay implementation of certain

projects.
 - Increase resources ( as taxes).

* In case of inequality (where surplus exist) the gov. has to follow one of
these alternatives:

-increase funds directed to implementation of projects.

-reduce loans by payment of loan installments before due date.

-invest surplus in other ways.

7. What are Types of budgets and summarize the

differences between them ?
Answer

1- Line-item / traditional Budgeting

(control orientation)

All governments have some form of line-item budgets

Ex. :

Gov. units Budget, xx/xx

Resources :

Taxes

Grants

Total resources

Uses:

Compensation for employees

Purchase of goods and service

Total uses

Balance (surplus or deficit)

All governments have some form of line-item budgets

It covers inputs only, this means that Gov. Acc. Deals only with what
is used to make the unit continues.
 Egyptian gov. still depends on this type of budgeting to formulate
the S.B.

It is allocation of resources according to cost of each object of

expenditure.

2-Functional/activity/performance/ programs budgeting

Management orientation)

Ex. :

Police authority annual budgets, xx/xx

Crime control and detection

Traffic control

Administration

..

total

It covers more administrative activities than had the traditional

budget.

Outputs as well as inputs were considered

3- Planning / programming Budgeting

(economic orientation)

The program has 3 basic elements and 11 subdivisions.

Ex. :

Planning and development program for gov. unit

1- land use planning

a) Development plan

b) development control

2- Environmental improvements
a) Environmental improvement areas

b) Care of trees

3- commercial redevelopment

a) Other industrial locations

b) Shops and offices

Planning : is a choice of optional goals of an organization and the

choice of the methods to be used to achieve those goals over a
specific time period.

Programming : is an implementation of particular projects designed

to accomplish an organizations goals in most effective and efficient
way.

Budgeting : is the cost estimate attached to each goal, plan,

program, and project.

4- management by objectives

Started in private sector.

Is an attempt to set objectives, track progress of the appropriate

program, and evaluate its results.

5- Zero- based Budgeting (ZBB)

Is a cost-benefit approach whereby it is assumed that the cost

allowance for an item is zero, and will remain so until the manager
justifies the existence of the cost item and the benefits the
expenditure brings.

It is appropriate for both non-profit organizations and governmental

units.

True and false question

1.Planning or programming budgeting covers input only

2.In cash basis revenues and costs are accrued ( recognized) as they are
earned , but as money is received or paid )

3.The treatment of inventory in government units means that there is no

physical inventory

Answer

1. false (Line-item / traditional Budgeting)

2. false ( accrual basis )
3. true
4. The depreciation of fixed assets is treated as
expense in the state budget. Identify whether this
statement is true or false and justify

Answer

False

No allocation of acquisition cost of a fixed asset to exp. Account of a

particular period that benefit from the use of assets.

Because :

1- the funds will be provided to gov. units at the end of asset life
from S.B.

2- these gov. units introduce goods and services to the public either
free or at low price (so, preparing income statement to calculate net
income does not make sense in gov. units).

5. The provision will be formulated each budgetary

year and recorded as an expense in the state budget.
Identify weather this statement is true or false and
justify
Answer

False

Regarding S.B., the process of setting up either provisions or reserves

does not make sense because the gov. will finance the funds needed to
face the increase in liabilities or decrease in assets which the provisions
were formulated to face as with reserves.