Principles of Accounting in New Accounting Model

7/25/2019 Principles of Accounting in New Accounting Model

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PRINCIPLES OF ACCOUNTINGIN NEW ACCOUNTING MODEL

23rdDecember, 2015

Management & Professional Development Department


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LEGACY SYSTEM OF ACCOUNTING


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The accounting system was ased on accounting

chart, under which the e(penditure was representedy the numeric numers and receipts were also

represented y the numeric numers ut written in

roman language

)etailed e(penditure was recorded as*

!ay of +fficers

!ay of other staff

Allowances andTA

!+ and

+ther contingent e(pend

LEGACY ACCOUNTING SYSTEM


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The accounting system was not reviewed % revised

vis--vis International /tandards till 190 )uring 1901 the chart was replaced with chart of

classification comprising two elements vis* 2unction

and +ect, as the previous chart was not

compactile with computeri#ed environment The new chart of classification too could not

produced results as per international standards

4onsidering the room for improvement and direneeds, during early ninetys the 2ederal Government,

with the technical assistance of the 6orld 7an",

launched a proect "nown as !roect to Improve

2inancial $eporting 8 Auditing &!I2$A'



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The !roect hired international accounting firms as

consultants to review the e(isting system ofaccounting and to suggest improvements % changes

where necessary

The 4onsultants proposed entirely a new system of

accounting and conseuently udgeting, "nown as:ew Accounting ;odel &:A;'

The :A; was reviewed y a committee of e(perts,

comprising memers from each province and federal

government

As a pilot the :A; was introduced in Aotaad

district during 2< =3-> and in ?!, AG!$ during

2< =5-@. it was introduced in !una and other

provinces during 2< =5-@



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NEW ACCOUNTING MODEL


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IMPLEMENTATION OF NAM

Article 170 of the Constitution empowers the AuditorGeneral of Pakistan to prescribe the form and manner

for keeping the accounts of the Federation, Provinces

and istrict Governments! Accordingl", #ew

Accounting $odel %#A$& has been prescribed and

implemented with the approval of the President of

Pakistan

As the accounts follow the budgetar" allocations,therefore, from the F' (00)*0+ the Punab adopted the

#A$ for -udget, both for the Provincial and istrict

Governments


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OBJECTIVES.

/he #A$ envisages to ensure good governance and

accountabilit" through

Accurac"

Completeness

eliabilit", and

/imelines

in Government2s financial reports at Federal, Provincial,

istrict and 3ub*district levels! /he information generatedin computeri4ed environment under #A$ would provide

direct support to Public Financial $anagement,

Accountabilit" and 5egislation oversight


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SALIENT FEATURES $odified Cash -asis of Accounting

ouble 6ntr" -ook eeping

Commitment Accounting

Fi8ed Assets Accounting

Assets egister

#ew Chart of Accounts



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eceipts will continued to be recorded on cash basis

Pa"ments will also be recorded on Cash -asis,however, certain payments will be recore oncommitment basis

Commitment is defined as an obligation to make

future pa"ments, and are recorded when an entit"issues a legall" binding purchase order or enters intocontract for provision of !oos an ser"ices!Commitments are booked against funds available inrelevant obect! /he recording of commitments istermed as modified basis of accounting

Commitments shall have a t#res#olvalue in termsof upee or percentage of allocation before these arerecogni4ed

Modifed Cash Basis o Accou!i"


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CO$$IT$ENT ACCOUNTIN%

Commitments honoured during a financial "ear shallstand finali4ed

9utstanding commitments at the end of a financial

"ear shall lapse but after due scrutin" b" A : AGand F, valid commitments would be reinstatedthrough budgetar" allocations during the ne8tfinancial "ear!

Commitment accounting provide financial managerswith a tool to measure and forecast spending

performance against budgetar" allocations ; avoidoverbooking of e8penditure in a particular period!



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&o'ble Entry Boo( )eepin! * "is+,+"is Sin!le Entry


Sin!le Entry Boo()eepin!

&o'ble Entry Boo()eepin!

3ingle 6ntr" 3"stem is a

s"stem of book*keepingwhich does not record orgive effect to the two foldaspect of each and ever"

transaction!


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&o'ble Entry Boo( )eepin! * "is+,+"is Sin!le Entry


Sin!le Entry Boo()eepin!

&o'ble Entry Boo()eepin!

>n this s"stem generall" Cash

-ook and books to recordpersonal accounts are onl"maintained, it is not reall" as"stem because under thismethod there ma" not be

recorded some of thetransactions and partiall"record some others

/he accounts which receive

the benefit are debited and theaccount which gives thebenefit is credited! >t is theultimate result of this s"stemthat ever" debit must have a

corresponding credit and viceversa! 9n a particular da" thetotal of the debit entries andthe credit entries of variousaccounts must be e?ual


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Fi8ed assets are ph"sical in nature such as buildings,

plants and e?uipment etc!, the" have strategic longterm value

Control of fi8ed assets is an important feature ofefficient financial management! >t involves accurate

reporting of Asset purchase

isposal ; transfers

5osses through misuse:theft

Government departments are re?uired to maintain a-i.e asset re!ister containing details of cost,location, date of purchase etc!

A fi8ed Asset egister is maintained b" the 3AP:*@

FI#ED ASSET ACCOUNTING


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/he Chart of AccountsB provides a frameworkB for

organi4ing accounting transaction and to provide anumber of views of a particular transaction!

/he various views are indicated with elements

comprising of alpha and numeric characters!

/he chart of accounts applies to all accounting entities

and contains following five elements

/0 Entity

10 F'nction

20 Ob3ect

40 F'n

50 6ro3ect

C$ART OF ACCOUNTS


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ENTITY ELEMENT

The entity means the organi#ational structure or

unit which create the transactions.

The organi#ational highest level is Government 8

lowest level is )rawing 8 )isursing +fficer &))+'%

4ollecting +fficer &4+'


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ENTITY ELEMENT CODES

! 5 Agriculture )eptt. 51 Agriculture

5= )G Agri. &B(tension'

53 )G Agri. &2ield'

5> )G Agri. &$esearch'

55 )G Agri. &6ater;anagement'

! 51 4; /ecretariat 5=5 4; /ecretariat

! 5= 4; InspectionTeam

55 4; Inspection Team

! 53 4olonies )eptt. 5C5 4olonies )eptt.


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ENTITY ELEMENT CODES

! 5> 4ommunication

8 6or"s )eptt.

51 4ommunication 8

6or"s

511 4hief Architect,!una

51= 4hief Bngineer7uilding &:orth'

513 4hief Bngineer7uilding &/outh'

51> 4hief BngineerDighways &:orth'

515 4hief BngineerDighways &/outh'


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FUNCTION ELEMENT

The economic function, relating to the provision of

a particular service, activity or Government

program. The function code have een designed

conforming to I;2 pulic sector reporting

reuirements


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FUNCTION ELEMENT % CODES

1 General !ulic /ervice

= !ulic +rder and /afety Affairs

3 )efense Affairs

> Bconomic Affairs

5 Bnvironment !rotection

@ Dousing and 4ommunity Amenities

C Dealth

0 $ecreation, 4ulture and $eligion

9 Bducation Affairs and /ervices

1 /ocial !rotection


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FUNCTION ELEMENT $IERARC$Y

The 2unction Blement is further divided into followingcomponents*

Major Function

Minor Function

Detailed Function

ub!Detailed Function

Programme


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FUNCTION ELEMENT % E#AMPLE

An e(ample of the 2unction Blement is shown as under*

;aor 2unction 1 General !ulic /ervices

;inor 2unction 11 2inancial 8 2iscal Affairs

)etail 2unction 11= 2inancial 8 2iscal Affairs

/u )etail 2unction 11=> Administration of

2inancial Affairs


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OB&ECT ELEMENT

The accounting classification, descriing the item

of e(penditure, receipt, asset or liaility. Bach

accounting classification is further su-divided

into a hierarchy, down to the level of detailed

oect head.


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OB&ECT ELEMENT % CODES

A 1 Bmployee $elated B(penses

A = !roect !re-investment Analysis

A 3 +perating B(penses

A > Bmployees $etirement 7enefits

A 5 Grants, /usidies and 6rite off of oans %Advances % +thers

A @ TransfersA C Interest !ayment

A 0 oans and Advances

A 9 B(penditure on Acuiring of !hysical Assets

"#penditure


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A 1 !rincipal $epayments of oans

A 11 Investments

A 1= 4ivil 6or"s

A 13 $epairs and ;aintenance

A 1> /uspense and 4learing

"#penditure


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$a#!%eceipts

7 1 )irect Ta(es

7 = Indirect Ta(es

7 3 +ther Indirect Ta(es

on $a#!%eceipts

4 1 Income from !roperty and Bnterprise

4 = $eceipts from 4ivil Administration and+ther 2unctions

4 3 ;iscellaneous $eceipts

%eceipts


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'apital %eceipts

B 1 $ecoveries of Investment

B = $ecoveries of oans and Advances

B 3 )et(ssets

2 1 4ash and 7an" 7alances

2 = $eceivales

2 3 !hysical Assets

2 > Investments

2 5 +ther Assets

%eceipts


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)iabilities

G 1 4urrent iailities

G = oans

G 3 )eferred iailities

G > +ther iailitiesG 5 4ontrol Accounts

G @ Trust Account-2und

G C Trust Account-!ost +ffice

G 0 Trust Account-$ailways

G 9 Trust Account-T8T

G 1 Trust Account-+ther

G 11 /pecial )eposit Investment


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G 1= /pecial )eposit 2und

G 13 /pecial )eposit Grant

G 1> ;int Account

Buity

D 1 Buities

)iabilities


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OB&ECT ELEMENT%% E#AMPLE

Accounting Blement A E B(penditure

;aor +ect A1-Bmployee related e(penses

;inor +ect A11 -!ay

)etailed +ect (01101! *asic Pa+ of fficers


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FUND ELEMENT

The pool of money from which udgetary

allocation is made &e.g. 4onsolidated 2und', and

is further su-divided into grants &in the case of

4onsolidated 2und' or !ulic Account detailed

heads.


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F-D

2un d could e either consolidated or !ulicAccount .' & P/

-%'"

This indicates the source of 2und from where the

e(penditure is eing met. This could e 4apital or

$evenue, denoted y 1or 2

-*!F-D

This indicates whether the e(penditure is voted %charged. This also indicates whether the e(penditure

is 4urrent, )evelopment or 4apital in nature

FUND ELEMENT


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FUND ELEMENT

' 'onsolidated

Fund

'apitalFoted 4urrent B(penditure

%evenue

Foted )evelopment B(penditure

Foted 4apital B(penditure

4harged 4urrent B(penditure

4harged )evelopment B(penditure

4harged 4apital B(penditure

! Public (ccount


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SUB'FUND ( SUB%ELEMENT

The different /uE2und % /uEBlements of 4onsolidated

2und are as follows

1 Foted 4urrent B(penditure

= Foted )evelopment B(penditure

3 Foted 4apital B(penditure

> 4harged 4urrent B(penditure

5 4harged )evelopment B(penditure

@ 4harged 4apital B(penditure


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FUND ELEMENT % E#AMPLE

2und 4 - 4onsolidated 2und/ource = E $evenue, 1-4apital

/u 2und 1 - Foted current e(penditure

Grant :umer 10 - Agriculture

2und :o. !4 =110- Agriculture.

&!$+FI:4IA'


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GRANT NUMBER

It is indicated y 3 :umeric 4haracters for !rovincial

Government and = :umeric characters for )istrict

Governments

PROJECT ELEMENT


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!roect is indicated y > :umeric characters,

allotted to each )evelopment !roect. The proect

element enales transactions to e aggregated

and reported at a proect level. Bach proect will

have a uniue proect numer

PROJECT ELEMENT


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GRANT NUMBERS FOR DE)ELOPMENT


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GRANT NUMBERS FOR DE)ELOPMENTCAPITAL E#PENDITURE

4apital Account is, accommodated under the relevant

minor%detailed function under the following grants -

!4 1=3C-Irrigation 6or"s.

!4 1=30-Agricultural Improvement and $esearch.

!4 1=39-Industrial )evelopment.

!4 1=>-Town )evelopment.

!4 1=>1-$oads and 7ridges.

!4 1=>=-Government 7uildings.

!4 1=>3- oans to ;unicipalities.


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FUNCTIONAL ARRANGEMENT

01 GENERAL PUBLIC SERVICE

011 EXECUTIVE & LEGISLATIVE ORGANS,FINANCAL

0112 FINANCIAL AND FISCAL AFFAIRS

011205 TAX MANAGEMENT (CUSTOMS. ITAX. EXCISE) AND TAXATION DEPARMENT

LQ401 S!"#$%'###


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Tha* You

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Principles of Accounting in New Accounting Model