Chapter 4-2 A at Accounting System and Practices-Fund Accounting

Accounting Standards
5 and Systems in the

Public Sector
Learning Outcomes
 Understand the basics of funds and fund

accounting
 Understand the existing accounting systems used
in the Malaysian public sector
Public Sector Accounting Governance and Accountability in the Malaysian All Rights Reserved
Context 5–3
Introduction
 Public sector accounting (PSA) - an accounting

method that is applied by governmental entities (or
public sector organizations comprising federal and state
governments, as well as local authorities) to govern
their day-to-day activities.
 The purpose of PSA - establish a good public

governance structure which is regarded as a
mechanism to enable users, particularly those in charge
of the state affairs, to make informed decisions.
Context 5–4
Introduction (cont.)
 The statements of financial position, income and

expenditure, and cash flow, as well as notes to the
accounts, statutory declarations and auditor
certificates are the examples of financial reporting
presented in the government’s public accounts.
Context 5–5
Fund Accounting System
 Fund accounting represents a system of financial record

keeping that focuses on how an organization uses its
finances─the activity of analyzing, recording,
summarizing, reporting and interpreting the financial
transactions of governments. This is accomplished
through the use of various types of funds.
Context 5–6
(cont.)
 Characteristics of fund accounting include:

1. It is an independent accounting entity.
2. Each fund has its own set of accounts with
complete double entry and financial
statements.
3. Self-balancing and autonomous, i.e. total assets
of a particular fund must equal to total liabilities
and fund balance or capital.
Context 5–7
(cont.)
Purpose of Fund Accounting
To determine the financial position and its changes in the

organization
To know the results of operations of the organization
To check its compliance with legal restrictions.
Context 5–8
(cont.)
Regulatory Requirements for Fund Accounting in the

Malaysian Public Sector
Federal government accounting is based on the concept

of the Consolidated Fund, where all revenues and moneys
raised or received except zakat, fitrah and baitulmal or
similar Islamic religious revenue have to be paid into and
form one fund known as the Consolidated Fund─required
by Article 97 of the Federal Constitution
Context 5–9
(cont.)
 Unless appropriated or otherwise authorized by

Parliament, no moneys except specified charged
expenditure shall be withdrawn from the Consolidated
Fund as required by Article 104 of the Federal
Constitution.
 Based on section 7 of the Financial Procedure Act

1957, The Consolidated Fund is divided into three
consolidated accounts.
Context 5–10
(cont.)
The Consolidated Account
Context 5–11
(cont.)
Public Trust Funds and Government Trust Funds

The Consolidated Trust Account consists of the
government trust funds, the public trust funds and deposits.
The government owns the assets and earnings of
government trust funds, and it can raise or lower future trust
fund collections and payments.
Categories of Public trust funds
1. The general trust fund
2. Deposits.
Context 5–12
(cont.)
Context 5–13
(cont.)
Consolidated Fund
Allgovernment revenues and moneys received have to
be accounted for into a fund, known as the Consolidated
Fund.
Cash and investments are held in three categories of

accounts under the Consolidated Fund, which are:
Context 5–14
(cont.)
 Consolidated Revenue Account

Federal government revenue comprises tax revenue,
non-tax revenue, nonrevenue receipts and revenue from
the Federal Territories.
1.Tax revenue - derived from direct taxes and indirect
taxes.
2.Non-tax revenue - includes fees and charges on
permits issued, services fees and rental of government
assets, interest and return on investments, fines and
penalties.
Context 5–15
(cont.)
3. Non-revenue receipts - include refunds of

expenditure and receipts from government
agencies
4. Revenue from the Federal Territories - includes
tax revenue and nontax revenue collected on
behalf of the Federal Territories of Labuan, Kuala
Lumpur and Putrajaya
Context 5–16
(cont.)
 Consolidated Trust Account

1. The main source of inflows as it is the allocation
of the revenue account through the budget.
2. It includes the Development Fund, the Housing
Loans Fund, government trust funds, public trust
funds, deposits and pensions trust funds.
Context 5–17
(cont.)
 Consolidated Loan Account

1. Consists of both external and internal borrowings
and can be referred to as an account that includes all
loan receipts and disbursements for the purpose of
repayment of outstanding loans and transfers to
other funds.
2. The government raises funds, at a gross sum at a
nominal value, from the domestic market by issuing
Treasury Bills (TB), Malaysian Government Securities
(MGS) and in Government Investment Issues (GII)
Context 5–18

Chapter 4-2 A at Accounting System and Practices-Fund Accounting

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Chapter 4-2 A at Accounting System and Practices-Fund Accounting

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Accounting Standards

5 and Systems in the

 Understand the basics of funds and fund

 Public sector accounting (PSA) - an accounting

 The purpose of PSA - establish a good public

 The statements of financial position, income and

 Fund accounting represents a system of financial record

 Characteristics of fund accounting include:

Purpose of Fund Accounting

To determine the financial position and its changes in the

Regulatory Requirements for Fund Accounting in the

Federal government accounting is based on the concept

 Unless appropriated or otherwise authorized by

 Based on section 7 of the Financial Procedure Act

Public Trust Funds and Government Trust Funds

Cash and investments are held in three categories of

 Consolidated Revenue Account

3. Non-revenue receipts - include refunds of

 Consolidated Trust Account

 Consolidated Loan Account

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