PSAF – May 2023 – L2 – SA – Q1 – Public Sector Financial Statements

Prepare statements for government performance and financial position, including adjustments and depreciation calculations.

Question

a. The following information relates to the accounts of Dovet State Government for the year ended December 31, 2022:

Description	DR (N’M)	CR (N’M)
Land and buildings (cost)	387,500
Long-term investments	187,500
Equipment and furniture	67,500
Accumulated depreciation:
– Land and building		40,000
– Motor vehicles		30,000
– Equipment and furniture		21,250
Motor vehicles (cost)	145,000
Federation account allocation		287,500
VAT allocation		87,500
Grants from Federal Government		33,750
Internally generated fund		97,500
Grant from donor agency		25,000
Personnel emolument	125,000
Maintenance of premises	5,000
Consolidated Revenue Fund charges	32,500
Overhead expenses	25,000
Miscellaneous expenditure/income	37,500	61,250
Loan notes		250,000
Current assets/liabilities	38,750	36,250
Consolidated Revenue Fund (CRF)		81,250
Total	1,051,250	1,051,250

Additional Information:

Loan interest outstanding at the end of the year was N12.5 billion.
Depreciation on tangible assets is charged at the following rates on cost:
- Building is 5% (cost of land is N250 billion)
- Motor vehicles is 20%
- Equipment and furniture is 15%
A building costing N12.5 billion with accumulated depreciation of N5 billion was sold for N11.25 billion. This transaction has not been adjusted in the accounts.
Interest on receivable amounted to N10 billion.

Required:

Prepare the Statement of Financial Performance for the year ended December 31, 2022.
Prepare the Statement of Financial Position as at December 31, 2022.

b. Financial statements provide information that meets a number of qualitative characteristics in financial reporting.

Required:
Discuss FOUR characteristics of financial reporting.

Answer

b. The four characteristics of financial reporting are:

Relevance:
- Financial information must be relevant to the decision-making needs of users. Relevance ensures that information can influence decisions, either by helping to predict future outcomes (predictive value) or by confirming or correcting past evaluations (confirmatory value).
Faithful Representation:
- Information must be a faithful representation of the underlying transactions or events. To achieve this, financial information must be complete, neutral, and free from error. This ensures that the reported information gives a true and accurate depiction of the organization’s financial situation.
Comparability:
- Comparability allows users to identify similarities and differences between entities or across different periods for the same entity. Consistent use of accounting policies and presentation methods helps achieve comparability, making financial statements more useful.
Timeliness:
- Financial information must be provided to users in a timely manner, i.e., while it still has the capacity to influence decisions. Delays in reporting financial data could make the information less useful.