Section A: Theory of Financial Accounting
Question 4:
1) Differentiate between Public sector accounting and Private sector accounting
2) Sources of revenue for a local government
3) Items of expenditure of a local government
Observation
Majority of the candidates that attempted this question on public sector accounting performed well. However some of them lose reasonable marks as they could not properly differente between private sector and public sector accounting. Some of the suggested answers were:
SN |
Public Sector Accounting |
Private Sector Accounting |
Objective is to ascertain the efficiency of the collection and use of public funds. |
Objective is to ascertain profitability or otherwise of the business. |
|
Does not adopt matching concept. Here, expenditure is compared with the fund voted for that activity or sector. |
Adopts the matching concept of accounting where expenses are compared with the associated income. |
|
Accounts mainly prepared are the Revenue and Expenditure Accounts and the Statement of Assets and Liabilities (i.e. Statement of Financial Position). |
Accounts prepared are the Statement of Comprehensive Income (Profit and Loss Account) and the Statement of Financial Position (Balance sheet). |
|
Cost of fixed asset is written off immediately after purchase. |
Cost of fixed assets is spread over the useful life of the asset. |
|
Accounts are mainly prepared on cash basis of accounting. (Debtors and creditors are not recognized). |
Accounts are prepared on accrual basis of accounting.(recognizes debtors and creditors). |
|
Uses the fund and vote system of accounting. |
Uses entity or proprietorship system of accounting. |
|
Tangible fixed assets are not recorded separately and shown in the Balance Sheet. |
Tangible fixed assets must be shown in the Balance Sheet together with the aggregate depreciation and net book value to date. |
|
Accounts are prepared for the general public. |
Accounts are prepared for owners/ shareholders and other stakeholders. |
|
The preparation and presentation of accounts is regulated by the Constitution of the country as well as the Financial Administration Acts and Regulations. |
The preparation of accounts is regulated by Company’s code, other Acts related to that specific business and International Accounting Standards. |
|
There is no distinction between capital and revenue expenditure and income. |
There is clear distinction between capital and revenue expenditure and income. |
- Sources of revenue for a local government
- Property/tenement rates
- Court fines
- Market tolls
- Lorry park levies
- Television and land licenses
- Subventions from central/federal government
- Donations/Grants from donor agencies
- Business operating permits
- Building permits
- Proceeds from sale of land
- Births and deaths registration fees
- Poll tax
- Customary court fines
- Rent
- Marriage registration fees
- Revenue from stool lands
- Burial permits
- Entertainment permits
- Interest on investments
(c) Items of expenditure of a local government
- Educational projects
- Health projects
- Honorarium
- Wages and salaries /personal emoluments
- Rent and rates
- Bank charges
- Protocol expenses
- Maintenance of roads
- Payment for utilities
- Repairs and maintenance
- Sanitation and environmental expenses
- General Office expenses – stationery
- Donations and grants
- Investments
- Repayment of debts