Assignment # 1

Subject: Public Sector Accounting (8555)

Submitted from

Name: Muhammad Abdullah

ID: 0000208029
Question No 1: What is public sector accounting model? Discuss in
detail.

The public sector accounting model refers to the specific framework and
principles used for accounting and financial reporting in the public sector. It
provides guidelines and standards to ensure transparency, accountability, and
effective financial management within public sector organizations, including
government entities, public agencies, and nonprofit organizations. The primary
objective of the public sector accounting model is to provide accurate, reliable,
and relevant financial information for decision-making, accountability, and
public scrutiny.

Key Features of the Public Sector Accounting Model:

1. Accrual Basis Accounting:

The public sector accounting model emphasizes the use of accrual accounting,
where financial transactions and events are recorded when they occur,
regardless of when cash is received or paid. Accrual accounting provides a more
comprehensive and accurate representation of an organization's financial
position, performance, and cash flows.

2. Budgetary Control and Integration:

Public sector accounting integrates financial management with budgetary
control. It ensures that financial reporting reflects budgetary allocations,
expenditure authorizations, and compliance with budgetary constraints. This
facilitates effective monitoring, control, and accountability of public funds.

3. Full Disclosure and Transparency:

The public sector accounting model emphasizes the disclosure of financial
information to ensure transparency. It requires comprehensive reporting of
financial statements, notes to the financial statements, and other relevant
disclosures. The aim is to provide stakeholders, including citizens, elected
officials, and oversight bodies, with a clear understanding of the financial
operations and performance of public sector entities.
4. Accountability and Stewardship:
The public sector accounting model emphasizes accountability and stewardship
of public resources. It ensures that financial reporting reflects the responsible
management and utilization of public funds, assets, and liabilities. This includes
disclosure of financial performance, compliance with laws and regulations, and
proper governance practices.

5. Performance Reporting:
The public sector accounting model focuses on performance reporting to assess
the efficiency, effectiveness, and economy of public sector entities. It includes
reporting on outputs, outcomes, and impacts achieved in relation to stated
objectives and targets. Performance reporting enhances accountability and
facilitates informed decision-making by stakeholders.

6. Harmonization and International Standards:

Many countries adopt international accounting standards, such as the
International Public Sector Accounting Standards (IPSAS), to promote
harmonization and comparability of financial reporting across jurisdictions.
IPSAS provides guidance on accounting principles, policies, and disclosure
requirements specifically tailored for the public sector.

Benefits of the Public Sector Accounting Model:

- Enhanced Transparency: The model promotes transparency by providing

comprehensive and accurate financial information, enabling stakeholders to
assess the financial health and performance of public sector entities.

- Improved Accountability: The model emphasizes accountability for the

stewardship and use of public funds, ensuring that public sector entities are
responsible for their financial decisions and actions.

- Informed Decision-Making: Accurate and reliable financial information

facilitates informed decision-making by policymakers, administrators, and other
stakeholders, helping to allocate resources effectively and assess the impact of
public sector programs and policies.
- Effective Financial Management: The model enables effective financial
management by integrating budgetary control, performance reporting, and
accrual-based accounting, leading to improved financial planning, monitoring,
and control.

- International Comparability: The adoption of international standards

promotes comparability of financial information across jurisdictions, facilitating
benchmarking, sharing of best practices, and international collaboration.

It's important to note that the specific implementation and adoption of the
public sector accounting model may vary across countries and jurisdictions, as
they adapt the model to their legal, political, and cultural contexts.
Question No 2: Discuss in detail the function and responsibilities of
AGPR & AGP.

AGPR (Accountant General of Pakistan Revenues) and AGP (Auditor General of

Pakistan) are important institutions within the financial and audit framework of
Pakistan. Let's discuss their functions and responsibilities in detail:

Accountant General of Pakistan Revenues (AGPR):

The AGPR is responsible for the accounting, financial reporting, and revenue
management of the federal government in Pakistan. Some of the key functions
and responsibilities of AGPR include:

1. Accounting and Financial Reporting:

AGPR is responsible for maintaining accurate and up-to-date accounting records
of the federal government. This includes recording revenue receipts,
expenditures, assets, liabilities, and other financial transactions. AGPR prepares
and presents financial statements, such as the annual budget execution report,
income and expenditure statement, and balance sheet of the federal
government.

2. Revenue Management:
AGPR plays a vital role in revenue management, ensuring the proper collection,
accounting, and reporting of revenue for the federal government. This involves
monitoring revenue receipts, reconciling with relevant authorities, and
maintaining accurate records to facilitate effective financial management.

3. Disbursement of Funds:
AGPR is responsible for the disbursement of funds to various government
departments and agencies in accordance with approved budgets and financial
regulations. This involves the issuance of treasury bills, processing payment
requests, and ensuring compliance with financial rules and procedures.
4. Internal Controls and Compliance:
AGPR establishes and maintains internal controls and procedures to ensure
compliance with financial rules, regulations, and standards. It conducts internal
audits to assess the effectiveness of financial management, identify weaknesses,
and recommend improvements.

5. Financial Accountability and Audit:

AGPR coordinates with the Auditor General of Pakistan (AGP) for external audits
of government entities. It provides financial information and supporting
documents required for audits and addresses audit observations and
recommendations to improve financial accountability.

Auditor General of Pakistan (AGP):

The AGP is an independent constitutional office responsible for auditing the
accounts and financial operations of the federal and provincial governments in
Pakistan. The main functions and responsibilities of AGP include:

1. Financial Audit:
AGP conducts financial audits of government departments, agencies, and
entities to assess the accuracy, reliability, and legality of financial transactions
and financial statements. The audit process involves examining accounting
records, verifying revenue and expenditure, and ensuring compliance with
applicable laws and regulations.

2. Performance Audit:
AGP conducts performance audits to assess the economy, efficiency, and
effectiveness of government programs, policies, and activities. Performance
audits focus on evaluating the achievement of objectives, resource utilization,
and the impact of government initiatives.

3. Compliance Audit:
AGP conducts compliance audits to ensure adherence to laws, regulations, and
financial rules. This includes assessing compliance with procurement
procedures, contract management, financial reporting requirements, and other
legal and regulatory obligations.
4. Reporting and Recommendations:
AGP prepares audit reports highlighting findings, observations, and
recommendations for improvement. These reports are submitted to the
President of Pakistan, provincial governors, and relevant authorities. The
reports help identifies financial irregularities, inefficiencies, and areas requiring
corrective actions.

5. Follow-up and Accountability:

AGP follows up on audit recommendations and assesses the implementation of
corrective actions by government entities. It promotes accountability by
tracking progress and holding government officials responsible for addressing
audit findings and improving financial management.

Both AGPR and AGP play crucial roles in ensuring financial accountability,
transparency, and efficient financial management within the government sector
in Pakistan. Their functions and responsibilities are designed to enhance
governance, safeguard public funds, and promote the effective use of resources
for the benefit of the country and its citizens.
Question NO 3: What are the general policies to be followed for
budgeting in the public sector accounting offices?

In the public sector, budgeting plays a crucial role in financial planning, resource
allocation, and accountability. To ensure effective budgeting, public sector
accounting offices typically follow general policies and principles. While specific
policies may vary depending on the country and organization, here are some
common general policies to be followed for budgeting in public sector
accounting offices:

1. Legal and Regulatory Compliance:

Public sector accounting offices must comply with relevant laws, regulations,
and guidelines related to budgeting. This includes adhering to budgetary laws,
financial regulations, and accounting standards applicable to the specific
jurisdiction.

2. Transparency and Public Participation:

Budgeting in the public sector requires transparency and public participation.
Accounting offices should establish policies that promote openness, provide
opportunities for public input, and ensure that the budgeting process is
transparent and accountable to citizens.

3. Medium-Term Perspective:
Public sector budgeting often involves considering the medium-term outlook
rather than focusing solely on annual budgets. Accounting offices should
develop policies to facilitate multi-year budgeting, considering long-term
objectives, sustainability, and the alignment of resources with government
priorities.

4. Performance-Based Budgeting:
Performance-based budgeting aims to link budget allocations to the expected
outcomes and results of government programs. Accounting offices should
establish policies to integrate performance measures, targets, and evaluations
into the budgeting process, promoting efficiency and effectiveness in resource
allocation.
5. Cost-Benefit Analysis:
Public sector accounting offices should encourage the use of cost-benefit
analysis and other evaluation techniques to assess the economic and social
impacts of proposed programs and projects. Policies should guide the inclusion
of cost-benefit analysis in the budgeting process to ensure informed decision-
making.

6. Flexibility and Contingency Planning:

Budgeting policies should allow for flexibility and contingency planning to
address unforeseen circumstances, emergencies, or changes in priorities.
Accounting offices should establish guidelines for budget adjustments,
reallocations, and the creation of contingency funds to manage unexpected
events.

7. Monitoring and Reporting:

Policies should emphasize the importance of monitoring budget execution and
financial performance. Accounting offices should establish procedures for
regular reporting, financial monitoring, and timely disclosure of budgetary
information to stakeholders, including elected officials, oversight bodies, and
the public.

8. Accountability and Internal Controls:

Budgeting policies should reinforce accountability and the establishment of
robust internal controls. This includes ensuring compliance with financial rules,
segregation of duties, proper authorization, and oversight mechanisms to
prevent fraud, waste, and mismanagement of public funds.

9. Continuous Improvement:
Budgeting policies should support a culture of continuous improvement in the
budgeting process. This involves regular evaluation and review of budgeting
practices, incorporating lessons learned, adopting best practices, and utilizing
feedback from stakeholders to enhance the efficiency and effectiveness of
budgeting activities.
10. Technology and Automation:
Public sector accounting offices should leverage technology and automation to
streamline and improve budgeting processes. Policies should encourage the use
of budgeting software, data analytics, and digital platforms to enhance accuracy,
efficiency, and transparency in budget preparation, monitoring, and reporting.

These general policies provide a framework for effective budgeting in the public
sector, ensuring responsible financial management, accountability, and the
optimal use of public resources. It is important to adapt these policies to the
specific needs and context of each organization and country.
Question NO 4: What are the accounting policies for recording
rescript/ revenues in the public sector bodies?

In the public sector, the accounting policies for recording receipts and revenues,
including rescript or tax revenue, are guided by applicable accounting standards
and regulations specific to each country or jurisdiction. While the exact policies
may vary, there are some common principles and practices followed in the
public sector for recording rescript/revenues. Here are key considerations:

1. Accrual Basis Accounting:

Public sector accounting typically follows the accrual basis of accounting. Under
this approach, revenues are recognized when they are earned or due, regardless
of the timing of cash receipt. This means that rescript/revenues are recorded
when the underlying transaction or event giving rise to the revenue occurs,
rather than when the funds are physically received.

2. Legal and Regulatory Requirements:

Public sector accounting policies for recording rescript/revenues adhere to
specific legal and regulatory requirements. These requirements may include
laws, regulations, and accounting standards that dictate how and when revenue
should be recognized. Compliance with these requirements ensures
transparency, consistency, and accountability in the financial reporting of public
sector bodies.

3. Revenue Recognition Criteria:

The recognition of rescript/revenue typically follows criteria established by
accounting standards or regulations. Common criteria include:

a. The existence of an enforceable legal claim or right to the rescript/revenue.

b. Reasonable assurance of collection or receipt of the rescript/revenue.
c. The amount of the rescript/revenue can be reliably estimated.

These criteria ensure that revenue is recognized when it is probable and can
be measured reliably.
4. Segregation of Revenue Sources:
Public sector accounting policies may require the segregation of different
revenue sources, including rescript/revenues, grants, fees, and other income.
This allows for clear identification and reporting of revenue from different
sources, enhancing transparency and accountability.

5. Classification and Disclosure:

Public sector accounting policies specify the classification and disclosure of
revenue in financial statements. This involves presenting revenue according to
appropriate categories and providing relevant disclosures, such as the nature of
the revenue, its source, and any restrictions or conditions associated with it.

6. Monitoring and Control:

Effective accounting policies for recording rescript/revenues in the public sector
include mechanisms for monitoring and control. This involves implementing
internal controls, segregation of duties, and regular reconciliation processes to
ensure accurate recording, prevent fraud, and safeguard public funds.

7. Audit and Compliance:

Public sector bodies are subject to external audits to verify the accuracy and
compliance of financial statements, including the recording of
rescript/revenues. Compliance with accounting policies, regulations, and
standards is assessed during the audit process to ensure the reliability and
credibility of financial reporting.

It is important to note that accounting policies for recording rescript/revenues

may differ based on the nature of the revenue, such as taxes, fees, fines, or other
sources. Public sector entities should establish clear policies and procedures
specific to each type of revenue to ensure accurate recording, consistent
reporting, and compliance with applicable regulations and accounting
standards.
Question No 5: Discuss in detail the year end accounting polices
followed in the public sector bodies.

Year-end accounting policies followed in public sector bodies are designed to

ensure accurate financial reporting, adherence to accounting standards, and
compliance with regulatory requirements. These policies aim to facilitate the
preparation of reliable financial statements and provide transparency and
accountability to stakeholders. While specific policies may vary depending on
the jurisdiction and organization, here are key considerations:

1. Accrual Basis Accounting:

Public sector bodies typically follow accrual basis accounting, recognizing
revenues and expenses when they are earned or incurred, regardless of the
timing of cash flow. This ensures that financial statements reflect the financial
position and performance of the organization accurately.

2. Compliance with Accounting Standards:

Year-end accounting policies in the public sector emphasize compliance with
relevant accounting standards, such as International Public Sector Accounting
Standards (IPSAS) or Generally Accepted Accounting Principles (GAAP) specific
to the country. Compliance ensures consistency in financial reporting and
facilitates comparability across different public sector entities.

3. Closing of Accounts:
At the year-end, public sector bodies follow specific procedures for closing their
accounts. This involves finalizing financial transactions, reconciling accounts,
and ensuring that all income and expenses are properly recorded for the period.
It includes reviewing and adjusting balances, accruals, and provisions to reflect
the financial position accurately.

4. Preparation of Financial Statements:

Public sector bodies prepare financial statements at the year-end to summarize
their financial activities and present the financial position, performance, and
cash flows. The financial statements typically include the statement of financial
position (balance sheet), statement of financial performance (income
statement), statement of cash flows, and notes to the financial statements.
5. Valuation of Assets and Liabilities:
Public sector accounting policies require the valuation of assets and liabilities at
the year-end. This involves assessing the carrying value of assets, such as
property, plant, and equipment, investments, and inventories, and determining
their fair value or impairment, if applicable. Similarly, liabilities, such as
payables, provisions, and long-term debt, are evaluated for accuracy and
completeness.

6. Depreciation and Amortization:

Public sector bodies calculate depreciation and amortization expenses for their
assets. Year-end accounting policies involve reviewing and adjusting
depreciation rates, useful lives, and residual values to ensure accurate allocation
of costs over the assets' lifespan.

7. Accruals and Provisions:

Accruals and provisions are crucial year-end accounting considerations in the
public sector. Accruals involve recognizing expenses or revenues in the financial
statements that have been incurred but not yet paid or received. Provisions, on
the other hand, are recognized for future obligations or contingencies that
require estimation, such as legal claims, environmental cleanup, or employee
benefits.

8. Disclosure and Notes to Financial Statements:

Public sector bodies are required to provide comprehensive disclosures and
notes to the financial statements. These disclosures clarify accounting policies,
significant accounting estimates, contingencies, related-party transactions, and
other relevant information necessary for a proper understanding of the financial
statements.

9. External Audit:
Year-end accounting policies in the public sector include procedures related to
external audit. External auditors review the financial statements, assess
compliance with accounting standards, and provide an independent opinion on
the fairness and reliability of the financial statements. Public sector bodies
cooperate with auditors, provide necessary information, and address any audit
findings or recommendations.

10. Compliance with Laws and Regulations:

Year-end accounting policies emphasize compliance with relevant laws,
regulations, and financial rules. This includes ensuring adherence to budgetary
regulations, procurement rules, tax laws, and other applicable legislation.

Public sector bodies should establish clear policies and procedures for year-end
accounting processes, ensuring that all financial transactions are properly
recorded, accounted for, and reported. Compliance with accounting standards,
transparency, and accurate financial reporting enhance accountability, support
informed decision-making, and maintain the public's trust in the organization.