FIRST SEMESTER SESSION 2017/2018 (A171)

BKAL3023 PUBLIC SECTOR ACCOUNTING

GROUP C
TUTORIAL 3
PREPARED BY:
GROUP MEMBERS NO. MATRIC
OOI KEE SANG 237911
LOH MEI CHWIN 238691
LIM ZHEN YUE 238965
SUPALUCK LEE @ ANN LEE POH 239227
YEAN

PREPARED FOR:
PROF. MADYA DR. ENGKU ISMAIL B ENGKU ALI

SUBMISSION DATE:
21 NOVEMBER 2017
 BKAL3023 Public Sector Accounting Group C

1. Differentiate between expenditures and expenses and explain why the

government reported expenditures instead of expenses.
Expenses is not necessarily the same as expenditures because expenses
considered cost that has expired, was used up, or was necessary in order to earn
the revenues during the time period indicated in the heading of the income statement.
They are summarized and included in the income statement as deductions from the
revenue. In order to calculate the net profit, the revenues have to be minus with the
expenses. Also, expenses used in full accrual basis such as Government-wide
Statements. For instance, the cost of the goods that were sold during the period are
considered to be expenses along with other expenses such as advertising, salaries,
interest, commissions, rent, and others.
Expenditure is a payment or disbursement, or the incurrence of a liability by an
entity, in exchange for goods or services. The expenditure may be for the purchase of
an asset, a reduction of a liability, a distribution to the owners, or it could be an
expense. Expenditures also known as the measure of fund liabilities liquidated with
current resources. Besides, it covers a specific point in time, while an expense may be
incurred over a much longer period of time. Expenses are being charged typically as
they produced while expenditures such as advance payment will not become expenses
until the time has passed to which the payment applies. Expenditures mostly used in
modified accrual basis such as Fund Financial Statements. For example, a
businessman has to pay RM20,000 to the bank to reduce its bank loan. This particular
payment might reduce the cash holding of the business but it is not an expense. It is
rather a reduction in the amount of the loan and the liability the business has to the
bank.
Furthermore, government reported expenditures instead of expenses because
government funds are concerned with expenditures which will decrease in net
financial resources, generally recognized when an asset is acquired and report only for
current liabilities not long-term liabilities. Government will only reported as expenses
when it is related to the government activities which will decrease in net economic
resources, generally recognized when consumed and report both current and long term
liabilities.

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2. Discuss the operations of financial accounting for Consolidated Fund

accounts. (Page 53 text book)

Definition of Consolidated Fund

Consolidated fund is defined as a legislative requirement with the purpose to account
all money other than that specifically exempted such as loan, trust and development
monies received by the government (Ali, 2017, p. 13). Its purpose is to insure all
monies other than those exempted are under the centralized control of a responsible
federal officer, namely the Accountant General (Ali, 2017, p. 13). The Consolidated
Revenue Account (CRA), Consolidated Trust Fund (CTF) and Consolidated Loan
Account (CLA) make up the Consolidated Fund. These accountants are required as
stipulated by the section 15 of Financial Procedure Act (FPA). The following is the
detail explanation of each type of Consolidated Funds.

Type of Consolidated Fund Transactions Involved

Consolidated Revenue Account (CRA) Purpose
 Accounts daily transactions of the
government.
Inflow (Revenue)
 Collects taxes (both direct and
indirect), service fees and other
revenue resources (e.g. investment
income).
Outflow (Expenditure)
 Payment for charged expenditure
and supply expenditure.
 Contributions to charged
expenditure and supply
expenditure.
Consolidated Trust Account (CTA) Purpose
 Accounts transactions involving
government trust funds and
monies received by the
government for specific purposes.
Inflow (Revenue)
 Receives deposit, trust and
recoveries advances.
Outflow (Expenditure)
 Payment for trust funds (e.g.
deposit, development fund,

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 BKAL3023 Public Sector Accounting Group C

sinking fund, housing loan fund,

government trust fund and public
trust fund)
Consolidated Loan Account (CLA) Purpose
 Accounts transactions involving
repayment of outstanding loans
and transfers to other funds.
Inflow (Revenue)
 Domestic and external
borrowings.
Outflow (Expenditure)
 Loan repayment, transfers to
housing loan fund, transfers to
development fund.

Financial Accounting for Consolidated Funds

Generally, financial accounting activities involve recognition, recording, summarizing
and reporting financial information in accordance to the guidelines and requirements.
Article 97 of the Federal Constitution 1957 stipulates the basis of financial accounting
for both federal and state government in the Consolidated Funds.

Recognition
Recognition is known as a process of determining the appropriate date and the amount
of any transaction going to be recognized in the accounting book (Ali, 2017, p. 23); in
which transactions can be categorized into two groups, namely (1) income and
expenditure (current period performance) and (2) assets and liabilities (continuous
financial position).

(1) Income and Expenditure

Modified cash basis is used in recognizing receipts and disbursements that
occur in a reporting period but then arises in a specific period after the
reporting period. Transactions will be recorded at the time when cash is
received or paid, except for certain debt and advances.
Item Accounting Treatment
Income (Revenue)  Recognized in the current period as the amounts
are received during the year.
 Revenues received in advance will be recognized
in the following period.

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 BKAL3023 Public Sector Accounting Group C

Expenditure  Recognized in the current period if, and only if,

any transactions fulfil these three conditions:
a. The financial controller receives the
payment order prior December the 31st at
the latest;
b. The chief accountant gets the payment
order on January the 10th at the latest; and
c. The payment is made by the accountant
prior January the 15th.

(2) Asset and Liability

Referring to as set-up assets or liabilities, which is short-term in nature and
derived from receipt or payment of cash.
Item Accounting Treatment
Asset  Significant assets of a long term nature should not be
disclosed on the balance sheets.
 Assets shall be reported at cost and no adjustments are
required to be made.
Liabilities  All liabilities and significant liabilities shall be disclosed
as “notes to the balance sheet”.

Recording
(1) Revenues, Expenditure, Transfer and Contribution, Adjustments
Transactions involved will impose a money effect, either in the current or
future accounting periods. Budgetary control and payment control are the two
primary public sector accounting tasks needed to be carried out.

Item Accounting Treatment

Budget Purpose
Approval  Execute budgetary control to all responsibilities center.
Journal entry
Dr. Estimated revenue
Cr. Estimated expenditure
Cr. Fund balance
Revenue (CRA) Journal entry
 Approved revenues budget
Dr. Tax revenue receivable
Dr. Non-tax revenue receivable
Cr. Revenue

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 BKAL3023 Public Sector Accounting Group C

 Cash collection
Dr. Cash
Cr. Tax revenue receivable
Cr. Non-tax revenue receivable
Expenditure Journal entry
(CRA)  Emolument
(i) Payment of voucher payable
Dr. Voucher payable
Cr. Cash
(ii) Payment of salary
Dr. Salary
Cr. Voucher payable
 Services and supplies
(i) Reduction of allocation available for future
expenditure
Dr. Commitment/Allocation
Cr. Reserve for commitment/allocation
(ii) Settlement of supplies expenditure
Dr. Supplies expense
Cr. Cash
(iii) Asset expenditure
Dr. Asset expenditure
Cr. Voucher payable/Account payable
Transfer (CLA Purpose
to CTA)  Record transactions which involve the transfer of
domestic and external borrowing (from CLA to CTA)
for country development.
Journal entry
 Annual transfer to debt service fund
Dr. Operating transfer to debt service fund
Cr. Due to debt service fund
 Inter-fund transfer from propriety fund
Dr. Due from propriety fund
Cr. Operating transfer from proprietary fund
Contribution Journal entry
(CRA to CTA) E.g. Contribution from CRA to housing loan fund
Dr. Contribution to housing loan fund
Cr. Cash
Asset (i) Cash and cash equivalents
(ii) Recoverable from taxes, transfer, the
corresponding taxation revenue
 Shall be recognized when the debt to the government
arises.

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 BKAL3023 Public Sector Accounting Group C

 Shall be initially measured at fair value of consideration

and subsequently measured at amortized cost.

(iii) Tax receivable

 Annual estimates shall be made and accrued at the end
of financial year.
 Receivables shall only be recognized when transactions
really happened.
 Shall be initially measured at fair value of consideration
and subsequently amortized at cost minus any provision
for doubtful debts.

(iv) Inventories
 Shall be initially measured at cost or at fair value as at
the date of acquisition.

(v) Financial assets

 Financial assets at FV through surplus/deficit
 Shall be initially measured at fair value and
subsequently measured at fair value and
recognizing any changes in fair value in
surplus/deficit.
 Loans and receivables
 Shall be initially measured at fair value plus
transaction cost and subsequently measured at
amortized cost less impairment loss.
 Held-to maturity
 Shall be initially measured at fair value plus
transaction cost and subsequently measured at
amortized cost less impairment loss.
 Available for sale financial assets
 Shall be initially measured at fair value plus
transaction cost and subsequently measured at
fair value or at cost less impairment or at fair
value and recognizing all cumulative changes in
fair value in a separate component of net
assets/equity until subsequent
de-recognition/impairment.

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 BKAL3023 Public Sector Accounting Group C

3. The following transactions and events affected the council funds of Pintar
Local Government during 2017. (Page 53-56 text book)
(a) Prepare the journal entries for Pintar Local Government according to
the above transactions.

No. Details Debit Credit

RM RM

1 Estimated revenue 6,200,000

Estimated Expenditure 5,300,000

Estimated Equity Transfer Fund 150,000

Estimated Transfer to debt Services Fund 650,000

Fund Balance 200,000

(To record approved budget for 2017)

2 Cash 80,000

Short Term Loan 80,000

(To record short term loan)

3 Vouchers Payable 135,000

Due to Federal Government 30,000

Cash 165,000

(To record payment for voucher payable and due to federal

government)

4 Account Payable 45,000

Cash 45,000

(To record payment for account payable)

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 BKAL3023 Public Sector Accounting Group C

5 Commitment/Materials and Supplies Allocation 800,000

Reserve for Commitment/Commitment for Material and Supplies 800,000

(To record commitment on allocation reserve for the commitment)

6 Deferred revenue (Permit and Licenses) 20,000

Revenue (Permit and Licenses) 20,000

(To record deferred revenue)

7 Assessment Taxes Receivable 3,265,306

Allowance for Uncollectible Assessment Taxes 65,306

Revenue (Assessment Taxes) 3,200,000

(To record accrual income taxes receivable and 2% estimated for

collectible from total receivable taxes)

8 Cash 340,000

Assessment Taxes Receivable 330,000

Interest and Penalties receivable on Assessment Taxes 10,000

(To record collection on assessment taxes receivable and interest and

penalties)

9 Cash 2,700,000

Assessment Taxes Receivable 2,700,000

(to record collection on assessment taxes receivable)

10 Cash 2,800,000

Revenue (Permit and Licenses) 2,800,000

(To record collection of revenue)

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11 Short Term Loan 20,000

Interest 5,000

Cash 20,000

(To record repayment for short term loan)

12 Reserve for Commitment/Commitment for Material and Supplies 800,000

Commitment/Material and Supplies Allocation 800,000

(To record the reverse on the entry of commitment on allocation)

Expenditure 800,000

Vouchers Payable 800,000

(To record approved of commitment)

13 Expenditure (Emolument) 3,345,000

Vouchers Payable 3,345,000

(To record approved of payroll)

Vouchers Payable 3,345,000

Cash 3,345,000

(To record payment of payroll voucher)

14 Expenditure 80,000

Due to Water Utility Fund 80,000

(To record supplies provided by Water Utility Fund)

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15 Allowance for Uncollectible Assessment Taxes 30,000

Interest and Penalties Receivable on Assessment Taxes 30,000

(To record write off for allowance for uncollectible assessment taxes)

Allowance for Uncollectible Interest and Penalties Receivable on

3,000
Assessment Taxes

Interest and Penalties Receivable on Assessment Taxes 3,000

(To record write off for allowance for uncollectible interest and
penalties receivable on assessment taxes)

16 Cash 40,000

Deferred Revenue (Permit and Licenses) 40,000

(To record deferred revenue)

(b) Prepare the Statement of Financial Performance (Consolidated Council

Fund) and the Statement of Financial Position for the year ended 31
December 2017 for Pintar Local Government.

Pintar Local Government

Statement of Financial Performance for the year ended 31 December 2017

RM RM
Revenue:
Assessment Tax 3,200,000
Permit & licenses 2,820,000
6,020,000
Expenditure:
Payroll 3,345,000
Interest 5,000
Water Utility 80,000
Material and Supplies 800,000 4,230,000
1,790,000
Pintar Local Government

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 BKAL3023 Public Sector Accounting Group C

Statement of Financial Position for the year ended 31 December 2017

RM RM
Asset:
Cash ( 100,000 + 200,00 – 165,000 -45,000 + 340,000 2,420,000
+2,700,000 + 2,800,000 – 205,000 – 3,345,000 +
40,000 )
605,306
Assessment tax receivable ( 400,000 + 3,265,306 -
330,000 – 2,700,000 – 30,000)
75,306
Less uncollected Assessment Tax Receivable (40,000
+ 65,306 – 30,000 ) 530,000
12,000
Interest & Penalty Receivable ( 25,000 - 10,000–
3,000 7,000
Less uncollected Interest & Penalty Receivable 5,000
(10,000 – 3,000 ) 2,955,000

800,000
Liabilities:
Voucher Payable ( 135,000 - 135,000 + 800,000 + 0
3,345,000 - 3,345,000 )
Deferred Revenue ( Permit and Licenses ) ( 20,000 – 0
20,000 ) 0
Due to Federal government ( 30,000 – 30,000 ) 80,000
Account Payable ( 45,000 – 45,000 )
Due to Water Utility Fund 245,000
1,790,000
Fund Balance:
Local Government Fund Balance 2,035,000
Excess revenue agent expenditure 2,915,000

4. Briefly explain the meaning of Consolidated Revenues Account,

Consolidated Trust Account and Consolidated Loan Account in the
Malaysian Federal Government.

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Type of Consolidated Fund Details and Explanation

Consolidated Revenue Account (CRA)
Federal Government Revenue
Operating Expenditure
Consolidated Trust Account (CTA)
Consolidated Loan Account (CLA)
 Accounts for government money
receipts and operating expenditure.
 Includes tax revenue, non-tax
revenue, non-revenue receipts and
also revenue from Federal
Territories.
 Comprises of (1) charged
expenditure and (2) supply
expenditure.
(1) Charged Expenditure
 Allocated by the law in
accordance to Article 98 of the
Federal Constitution.
 Expenditures are given priority
and allowed to be spent
without any approval from the
Parliament.
(2) Supply Expenditure
 Legislated by law in
accordance to Article 100 of
the Federal Constitution.
 Expenditure is made to cater
the operation of the
government organization.
 Accounts transactions involving
government trust funds and monies
received by the government for
specific purposes.
 Comprises of Government Trust
Funds, Public Trust Funds and
Deposit.
 Allocations and payments are in
accordance to Section 10 of the
Financial Procedure Act 1957.
 Accounts transactions involving
repayment of outstanding loans
and transfers to other funds.

References:

Ali, E. I. (2017). Financial Accounting Practice in Public Sector. In E. I. Ali, Public

Sector Financial Accounting and Reporting Practiced in Malaysia (pp. 1-52).

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Sintok: Northern University of Malaysia.

Expenditure. (6 May, 2017). Retrieved from Accounting Tools:

https://www.accountingtools.com/articles/2017/5/6/expenditure

Expenditure Accounting: Governmental Funds. (n.d.). Retrieved from MERCER

COUNTY COMMUNITY COLLEGE:
http://www.mccc.edu/~horowitk/documents/Chapter06D.pdf

Recognizing Expenditures in Governmental Funds. (n.d.). Retrieved from

https://www.webpages.uidaho.edu/acct430/Lectures/Govt%20Rev%20&
%20Exp%20(Chs%204-6)/Ch05%20lecture.pdf

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