ADDENDUM

The Accrual Accounting Manual is a product of Federal Account Allocation

Committee FAAC and FAAC Sub Committee on IPSAS Implementation for all

Public Sector Entities in Nigeria. The Manual could best be described as the new

financial book that shows how transactions would be dealt with as from January

2014.

Six practical question are provided that could guild stakeholders most

especially the practitioners to deal with each of the financial transaction when the

need arises. These questions deal with :

- First Adoption of IPSAS

- Posting of Transactions

- Preparation of Trial Balance

- Preparation of Statement of Cash flow Statement

- Preparation of Financial Performance Statement

- Preparation of Statement of Financial Position and

- Preparation of Statement of Changes in Net Assets/Equity.

All these questions will guild users of this Manual in their daily activities.

It is therefore a book of reference for all Public Sector Accountants.

You will find it useful and interesting.

ADARAMOLA F.O. Msc (FCA)

Ondo State Auditor-General for Local Governments

1
 PRACTICAL ILLUSTRATIONS

QUESTION 1. The Statement of Financial Position of Alake State/Local

Government as at 31st December,2015 is as presented below:

Alake State/Local Government of Financial Position As at 31st December, 2015

Assets Note N M N M
Current Assets
Cash and Cash Equivalent 250
Advances 100
Loan 65 415

Non Current Assets

Loan to other Govt. 20
Investment 75 95
Total Assets 510
Liabilities
Current Liabilities
Deposit 120
Un-receipted Deduction 35
Short term loan 15
170
Non Current Liabilities
External Loan 75
Internal Loan 55
Total Liabilities 130
Net Assets (300)
210
Net Asset/Equity ===
Net Surplus/(Deficit) 210
210
===

Other Relevant Information

In preparation for IPSAS Accrual in the year 2016, the following actions were taken by
the Management.

(a) Items in the Stores were value using FIFO method at N10m

(b) The unpaid salaries at year end were N600m

(c ) A look at the un-vouched vouchers revealed the following:

2
 - Staff out of pocket allowances N55m
- Mobilization fees N75m
- Retention fees N35m
- Politicians Severance Allow. N25m
- A Toyota Hilux van valued at N7m was supplied by Federal Govt. in December,
2015, no record of this amount in the books of Alake as it was not given or added as
part of Statutory Allocation.

(d) A contractor was awarded a contract to supply Tractors worth N200m in Sept. This
contractor did not supply these tractors until January 15th when the financial
statement had been prepared but not yet approved. The records of Alake showed a
payment of the whole amount to the Contractor.

(e) Bank Statement revealed a loan of N200m from Wema bank to finance the tractors
above. No other records of Alake showed this transaction. The processing fee and
interest accrued as at Dec.,2015 stood at N10m.

(f) The loan in (e) above is payable in 5 equal installments.

(g) A dividend warrant received in January 2016 revealed that Alake has an equity
share in Enterprise Bank worth N700m. This has long been deleted from the books
because of the distress nature of the bank.

Required:

In line with IPSAS 33, First Adoption of IPSAS, re-prepare the statement of financial
position of Alake to suit the requirements of IPSAS Accrual.

3
 Question 2: The following were the transaction of Lekeleke State/Local
Government for the year ended 31st December,2016.

N M

- Opening balance:
- Cash 22
- PPE 8
- Payable 2
- Capital Grant. 28
- Statutory Allocation received 200
- Salaries and wages paid 120
- Deductions paid during the period:

PAYE - 2 out of 3
COOP - 4 out of 6
Union - 4 out of 6
Welfare - 5 out of 5 15

- Independent Revenue Received:

Tax 60

Non Tax 30 90

- A particular company that was billed N1m for Tenament

Paid N0.8, the remaining was not paid till the end of the

Year.

- WHO released for eradication of Polio 5

- Leave Bonus paid 0.5

- Loan received from Skye Bank to construct office complex 20

- Administrative and processing fee 1

- Interest 1

- Contract for office complex awarded 20

- Plant and Equipment purchase 25

4
 N20m paid immediately and the balance later

- Installation and transportation 1

Useful life - 20 years

Residual value 6

- Motor vehicle purchased 5

Expected Useful Life - 5 years

Residual value - nil.

- The back-up car of the Director with book value of N4m

Involved in an accident and the value after repair was put at

N2.5m

- Office Complex contract paid 20

- A vehicle purchased 2 years ago at N6m with residual value

nil estimated useful life 5 years was placed for boarding. The

vehicle was disposed off at 5

- An Investment property purchased 200

- Stationery purchased on credit – 500 bundles 4

- Another stationery purchased - 400 bundles 3

- Stationery purchased

N3m paid - 800 bundles 5

- Stationery purchased - 275 bundles 2

- The Management using FIFO Method.

Issued and used 600 bundles

- Issued and used 350 bundles

- Issued and used 725 bundles

- Purchased a license to operate a radio station 5

- Bought 500 chicks at N400 each 2

- Feeding and upkeep expenses 1

- 50 chicks were lost but the remaining were sold at 3.6

- Capital Grant received 50

Received for Korede State/Local Govt. 2

5
 Independent Revenue Received 24

- PPE (building) that cost N2m and has spent half of it useful

life was revalued for 5

- As a result of change from IPSAS cash to IPSAS Accrual the

following assets were valued:

Building - 5

Roads - 15

Plant & Machinery - 7

Ships - 3

Aircraft - 8

Motor vehicle - 10

Furniture & Fittings - 6

Office equipments - 6

Household equipments 5

Others - 5 65

- Purchase equity share in Nestle 5

- Amount due for payment within the next 12 months out of the loan

from Skye Bank. 3

Required:

Prepare the Trial balance of Lekeleke State/Local Government as at year end.

From the above Trial Balance and the Cash book, prepare

Questions 3 Statement of Cash flow

4 Statement of Financial Performance

5 Statement of Financial Position of Lekeleke State/Local Govt. for the year

ended 31st Dec.,2016

Question 6

6
The following information were extracted from the books of Bisola State/Local
Government, Ondo for the year ended 31st December,2016

31 Dec. 2015

N M

Revaluation Reserve 400

Translation Reserve 700

Accumulated Surplus/(Deficits) 200

During the year (2014), losses of N70m was recorded in respect to changes in Accounting
Policy, Surpluses on revaluation of property N40m; Deficits on revaluation of investments
N40m; Net gains (Revaluation reserve) not recognize in the statement of financial
performance N200m; Net loss (Translation reserve) not recognized in the statement of
financial performance N60m.

During the year (2014), Deficit on revaluation of property reserve was N 80m ; Surplus on
revaluation of investments N 70m; Net loss (Revaluation reserve) not recognized in the
statement of financial performance N 80m; Net loss (Translation reserve) not recognized in
the statement of financial performance N 60m; Net deficit for the period N 400m.

Required:

Prepare the Bisola State/Local Government’s statement of Changes in Net Asset/Equity for
the year ended 31st December,2016 according to the provisions of IPSAS.

7
 SOLUTION 1

ALAKE STATE/LOCAL GOVERNMENT

STATEMENT OF FINANCIAL POSITION AS AT DECEMBER, 31ST 2015

2014 NOTE N M
Assets Assets
Current Assets
Cash &Cash equivalent 260
Receivable 165
Prepayments 130
Inventories 10
Total Current Assets 565 565
Non-Current Assets
Long Term Loans 20
Contract 35
Investments 775
Property, Plant &Equipment 207
Investment Property -
Intangible Assets -
Total Non Current Assets 1037
Total Assets 1602
Liabilities
Current Liabilities
Deposit 120
Short Term Loan & Debts 15
Unremitted Deduction 35
Payables 610
Short term provisions
Current portion of borrowings 40
Total Current Liabilities 820 820
Non-Current Liabilities
Public fund -
Long Term Provision -
Long Term Borrowings 290
Total Non-Current Liabilities 290
Total liabilities (1110)
Net Assets 492
=====
Net Assets/Equity
Capital Grant
Reserves 282 282
Accumulated Surplus/Deficit 210 210
Minority Interest -
Total Net Assets 492
====

8
 SOLUTION 2

LEKELEKE STATE/LOCAL GOVERNMENT

TRIAL BALANCE AS AT 31ST DECEMBER 2016

Dr. Cr.
Cash 37.9
Statutory Allocation 200
Salaries 120
Unremitted Deduction 5
Independent Revenue 115
Receivables 0.2
Grant 5
Investment 5
Allowance 0.5
Loan 18
PPE 121
Depreciation 8.4
Impairment 1.5
Accumulated Impairment 1.5
Payables 13
Intangible Assets 5
Gain 2
Reserve 65
Investment Property 200
Accumulate Depreciation 5
Inventory 2.16
Revaluation Surplus 4
Stationeries 11.84
Capital Grant 78
Amortization 1
Accumulated Amortization 1
Deposit 2
TOTAL 514.5 514.5

SOLUTION 3
9
 LEKELEKE STATE/LOCAL GOVERNMENT

STATEMENT OF CASH FLOW FOR THE YEAR ENDED 31ST DECEMBER,2016

Cash Flow from operating Activities

Cash In Flow 200

Ind. Revenue 114

Ind. Revenue 0.8

Total Cash Inflow 314.8

Cash Out Flow

Salaries 120

Allowance 0.5

Inventory 8 (128.5)

Net Cash flow from Operating Activities 186.3

Cash flow from Investing Activities

Cash in Flow

Disposal of Assets 5

Agricultural Produce 3.6 8.6

Cash Out Flow

PPE 41

Investment 5

Intangible Assets 5

Biological Assets 3

Investment Property 200 (254)

Net Cash flow from Investing Activities (245.4)

Cash flow from Financing Activities

10
Cash In flow:

Grant 5

Loan 20

Capital Grant 50

Deposit 2 77

Cash out flow

Adm & Interest 2 (2)

Net Cash flow from Financing Activities 75

Cash and Cash equivalent 15.9

Cash and Cash equivalent as 1/1/x1 22

Cash and Cash equivalent as at 31/12/x1 37.9
=====

11
 SOLUTION 4
LEKELEKE STATE/LOCAL GOVT.

Statement of Financial Performance for the Year Ended 31st December,2016

Revenue
Statutory Allocation 200
Tax Revenue 60
Non Tax revenue 55
Aid & Grant 5 320

Expenditure
Salaries & Wages 120
Social benefit (Allowance) 0.5
Overhead cost 11.84
Depreciation 8.4
Impairment 1.5
Amortization 1 (143.24)

Surplus/(Deficit) from Operation 176.76

Other Activities
Revaluation Surplus 4
Gain on Disposal of Assets 2
Gain/loss on foreign Exchange Transaction -
Surplus/Deficit) from Ordinary activities 182.76
Minority Interest (-)
Surplus/(Deficit) for the period 182.76
=======

12
 SOLUTION 5

LEKELEKE STATE/ LOCAL GOVT.

Statement of Financial Position for the Year Ended 31st December, 2016

Assets

Current Assets

Cash and Cash equivalent 37.9

Receivables 0.2

Prepayment -

Inventories 2.16

Total Current Assets 40.26

Non Current Assets

Long Term Loan

PPE 121

Investment Property 200

Investment 5

Intangible Assets 5 331

Total Assets 371.26

Liabilities

Current Liabilities

Deposit 2

Accumulated impairment 1.5

Unremitted Deduction 5

Payables 13

Accumulated Depreciation 5

Accumulated Amortization 1

13
Current portion of Borrowings 3 30.5

Non Current Liabilities

Public Fund -

Long Term Provision -

Long Term Loan 15 15

(45.5)
Total Liabilities 325.76
======
Net Assets

Net Assets/Equity

Capital Grant 78

Reserves 65

Accumulated Surplus/(Deficit) 182.76

Net Assets 325.76
=====

14
 SOLUTION 6

BISOLA STATE/LOCAL GOVERNMENT ONDO

STATEMENT OF CHANGES IN NET ASSETS/EQUITY FOR THE YEAR ENDED 31 ST DECEMBER,2016

Revaluation Translation Accumulated Total

Reserve Reserve Surpluses/

(Deficits)

N’m N’m N’m N’m

Balance at 31st December,2015 400 700 200 1300

Changes in accounting Policy (70) (70)

Restated Balance 400 700 130 1230

Surplus on Revaluation of Property 40 40

Deficit on Revaluation of Investment (40) (40)

Net Gains and Losses not Recognized 200 (60) 140

in the Statement of Financial

Performance

Balance as at 31st December 2014 600 640 130 1370

Deficit on Revaluation of Investment (80) (80)

Surplus on Revaluation of Investment 70 70

Statement of Financial Performance (80) (60) (140)

Net Deficit for the period (400) (400)

Balance as at 31st December 2016 510 580 (270) 820

15