Topic: Accounting policies for cash and accrual-based accounting systems

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PSAF – Nov 2020 – L2 – Q1a – Accounting policies for cash and accrual-based accounting systems

This question addresses how different accounting bases (cash vs. accrual) affect the treatment of specific items in financial statements.

Question

The Director of Finance and the Principal Spending Officer of a Public Sector Organization are in disagreement as to which basis of accounting will provide the most useful information to the users. The Principal Spending Officer strongly believes that whether an entity applies cash basis or accrual basis, the effect is the same. The Director of Finance disagrees with him totally, arguing that different accounting treatments apply to both and therefore affect the level of disclosure in the financial report. The Director of Finance proceeded to illustrate his point by drawing on the basis of accounting on these items in the financial statement:

i) Motor vehicle donated to the entity

ii) Revenue due but not received by the entity

iii) Furniture acquired in the current year

iv) Electricity consumed for the year but not paid to the Electricity Company.

Required:

The Director of Finance has tasked you to present a brief paper on how the two accounting bases would be applied in the treatment of items i) to iv).

Answer

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Tags: Accrual Basis, Cash Basis, Financial Reporting, Public Sector Accounting
Level: Level 2

Topic: Accounting policies for cash and accrual-based accounting systems
Series: NOV 2020

PSAF – May 2017 – L2 – Q1b – Accounting policies for cash and accrual-based accounting systems

This question explains the differences between accrual and cash accounting, justifies the adoption of accrual accounting in the public sector, and describes the concept of commitment accounting.

Question

You have received an official email from your Director which reads:

“Hello Accountant,

Hope you are doing well. We have closed from a workshop organized by the Controller and Accountant General’s Department on public financial management not long ago and the discussion was all about the adoption of accrual accounting in the public sector. It was emphasized that migration from cash basis to accrual basis is necessary to improve financial reporting and transparency in the public sector. You know I have little knowledge in Accountancy so I was completely lost in the discussions and I wished you had attended the workshop with me.

Another issue discussed was commitment accounting. We were made to understand that commitment accounting strengthens public financial management and therefore departments must ensure that every expenditure is committed in accordance with the appropriation prior to spending.

Please could you help me with some information on these issues?

Thank you, Director.”

Required: i) Explain to the Director THREE differences between accrual accounting and cash accounting. (3 marks)

ii) Identify THREE justifications for adopting accrual accounting in the public sector. (3 marks)

iii) Explain the term commitment accounting and illustrate how it could strengthen public financial management. (4 marks)

Answer

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Tags: Accrual Accounting, Cash Accounting, Commitment Accounting, Public Financial Management
Level: Level 2

Topic: Accounting policies for cash and accrual-based accounting systems
Series: MAY 2017

PSAF – July 2023 – L2 – Q1a – Accounting policies for cash and accrual-based accounting systems

Discuss the conditions for transitioning from cash basis to accrual basis accounting in a public sector entity.

Question

A public sector entity is transitioning from cash basis of accounting to accrual basis of accounting for the 2022 financial year. You are a member of the transitional committee set up to ensure smooth change over.

Required: Discuss FIVE (5) conditions for seamless transition from cash basis of accounting to accrual basis of accounting.

Answer

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Tags: Accounting Transition, Accrual Basis, Cash Basis, Financial Reporting, Public Sector, Transition
Level: Level 2

Topic: Accounting policies for cash and accrual-based accounting systems
Series: JULY 2023

PSAF – Mar 2023 – L2 – Q1a – Accounting policies for cash and accrual-based accounting systems

Explains the assertion that cash basis information can be derived from accrual basis accounting and discusses how accrual accounting provides superior cash information.

Question

In a recent meeting held to discuss the implementation of accrual basis of accounting in your entity, the principal spending officer was apprehensive about how the change from cash basis to accrual basis would impact on accountability for cash. The Director of Finance convinced him that accrual basis provides much superior cash information about the entity and therefore there is no need to be concerned about the transition from cash accounting to accrual accounting. He further stated that “cash basis information could be derived from accrual basis accounting”.

Required:
i) Explain the assertion that “cash basis information can be derived from accrual basis accounting” as stated by the Director of Finance. (4 marks)
ii) Discuss how accrual accounting provides superior cash information about an entity. (6 marks)

Answer

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Tags: Accrual Accounting, Cash Basis, Financial Reporting, IPSAS, Public Financial Management, Public Sector
Level: Level 2

Topic: Accounting policies for cash and accrual-based accounting systems
Series: MAR 2023

PSAF – March 2024 – L2 – Q1 – Accrual Basis Challenges and Measurement Objectives

Discuss the challenges in adopting accrual basis accounting and the objectives and bases of measurement in public sector financial reporting.

Question

a) Changing from cash accounting to accrual accounting is necessary to improve financial reporting and transparency in the public sector. However, it is not going to be without systemic and structural challenges.

Required:
i) Explain FIVE (5) challenges involved in adopting Accrual Basis Accounting. (5 marks)
ii) Explain FIVE (5) measures Ghana can put in place to successfully implement Accrual Basis Accounting. (5 marks)

b) Measurement of assets is a very important aspect of financial reporting. Preparers of financial statements should always consider the objective of measurement to ensure that the financial statements provide information that is useful to users for accountability and decision-making purposes.

Required:
i) Explain the objectives of measurement in financial reporting of public sector entities. (4 marks)
ii) Explain FOUR (4) bases of measurement of assets and provide in each situation where it is applied in financial reporting. (6 marks)

Answer

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Tags: Accounting Standards, Accrual Basis Accounting, Financial Reporting, Measurement of Assets, Public Financial Management
Level: Level 2

PSAF – Nov 2021 – L2 – Q1a – Accounting policies for cash and accrual-based accounting systems

Explain the policy implications of adopting accrual-based accounting on four measurement bases in public sector accounting.

Question

Ghana is determined to implement an Accrual-based Accounting policy to enhance accountability and aid decision-making in the public sector.

Required:
Explain the policy implications on FOUR (4) measurement bases in public sector accounting as a result of the adoption and implementation of Accrual Based Accounting.

Answer

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Tags: Accrual Accounting, Measurement Bases, Policy Implications, Public Sector Accounting
Level: Level 2

Topic: Accounting policies for cash and accrual-based accounting systems
Series: NOV 2021

PSAF – May 2019 – L2 – Q1a – Accounting policies for cash and accrual-based accounting systems

Explain the key characteristics of commitment, accrual, and cash accounting bases used in public sector accounting.

Question

a) Accounting Concepts and Bases are broad basic assumptions, which underlie the preparation of the periodic financial statements of entities in the public sector. Unless stated, it would be assumed that they have been adhered to when preparing financial statements.

Required:
Explain THREE (3) key characteristics of each of the following Accounting Bases used in Public Sector Accounting:
i) Commitment accounting
ii) Accrual accounting
iii) Cash accounting
(9 marks)

Answer

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Tags: Accrual Accounting, Cash Accounting, Commitment Accounting
Level: Level 2

Topic: Accounting policies for cash and accrual-based accounting systems
Series: MAY 2019

PSAF – April 2022 – L2 – Q5 – Accounting policies for cash and accrual-based accounting systems

Explain constitutional provisions on budgeting, the concept and benefits of Citizen’s Budget, the role of budget guidelines, and how to address financial transactions not covered by IPSAS.

Question

a) Budgeting is an essential element of Public Financial Management and it is a requirement of the Constitution and other Public Financial Management enactments. Budgeting is a process that requires the engagement and participation of citizens for accountability purposes. The prime objective of budgeting is to set out the financial plans of government for the ensuing year and how government plans and programs will be financed.

Required:
i) Explain TWO (2) provisions in the 1992 Constitution relating to budgeting. (4 marks)

ii) Explain Citizen’s Budget and identify THREE (3) of its benefits in Public Financial Management. (5 marks)

iii) Explain the role of budget guidelines in budgeting and identify FOUR (4) items of information to be expected in a budget guideline. (6 marks)

b) A Public Sector entity that applies IPSAS is currently faced with a particular financial transaction for which no IPSAS exists for dealing with the issue. The management is undecided on the choice of accounting policy to apply.

Required:
Discuss how the matter can be dealt with by the management of the entity. (5 marks)

Answer

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Tags: Budget Guidelines, Budgeting, Citizen’s Budget, Constitution, IPSAS
Level: Level 2

PSAF – May 2020 – L1 – Q1a – Accounting policies for cash and accrual-based accounting systems

Discusses the differences between cash accounting policies and accrual accounting policies concerning their recognition and treatment in financial statements for various accounting elements.

Question

Cash accounting policies and accrual accounting policies, when applied respectively to the same transaction or events of the same entity, will produce different pictures of the financial performance, position, and cash flow information of the entity. Thus, the choice of alternative policies needs to be given much consideration. The International Public Sector Accounting Standards Board (IPSASB) permits the use of cash accounting policies whilst encouraging the application of accrual accounting policies in the preparation of financial reports for the public sector.

Required:
Discuss the difference between cash accounting policies and accrual accounting policies in terms of recognition and/or treatment of the following in the Financial Statements: i) Revenue
ii) Capital asset
iii) Allowances and provisions
iv) Contingent liability

Answer

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Tags: Accrual Accounting, Cash Accounting, Financial Statements, IPSAS, Public Sector Accounting
Level: Level 2

Topic: Accounting policies for cash and accrual-based accounting systems
Series: MAY 2020

PSAF – May 2018 – L2 – Q1d – Accounting policies for cash and accrual-based accounting systems

Contrast cash basis and accrual basis of accounting in terms of revenue recognition, expenditure recognition, non-financial asset disclosure, and depreciation.

Question

There are two main bases of accounting in the public sector, and these are cash basis and accrual basis. These two bases differ in many respects, though there are some similarities.

Required:
Contrast cash basis and accrual basis of accounting in the public sector in terms of:
i) Recognition of revenue
ii) Recognition of expenditure
iii) Disclosure of non-financial assets
iv) Notion of depreciation

Answer

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Tags: Accrual Basis, Cash Basis, Expenditure Recognition, Public Sector Accounting, Revenue Recognition
Level: Level 2

Topic: Accounting policies for cash and accrual-based accounting systems
Series: MAY 2018

PSAF – Nov 2020 – L2 – Q1a – Accounting policies for cash and accrual-based accounting systems

This question addresses how different accounting bases (cash vs. accrual) affect the treatment of specific items in financial statements.

Question

i) Motor vehicle donated to the entity

ii) Revenue due but not received by the entity

iii) Furniture acquired in the current year

iv) Electricity consumed for the year but not paid to the Electricity Company.

Required:

The Director of Finance has tasked you to present a brief paper on how the two accounting bases would be applied in the treatment of items i) to iv).

Answer

Find Related Questions by Tags, levels, etc.

Tags: Accrual Basis, Cash Basis, Financial Reporting, Public Sector Accounting
Level: Level 2

Topic: Accounting policies for cash and accrual-based accounting systems
Series: NOV 2020

PSAF – May 2017 – L2 – Q1b – Accounting policies for cash and accrual-based accounting systems

This question explains the differences between accrual and cash accounting, justifies the adoption of accrual accounting in the public sector, and describes the concept of commitment accounting.

Question

You have received an official email from your Director which reads:

“Hello Accountant,

Please could you help me with some information on these issues?

Thank you, Director.”

Required: i) Explain to the Director THREE differences between accrual accounting and cash accounting. (3 marks)

ii) Identify THREE justifications for adopting accrual accounting in the public sector. (3 marks)

iii) Explain the term commitment accounting and illustrate how it could strengthen public financial management. (4 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Accrual Accounting, Cash Accounting, Commitment Accounting, Public Financial Management
Level: Level 2

Topic: Accounting policies for cash and accrual-based accounting systems
Series: MAY 2017

PSAF – July 2023 – L2 – Q1a – Accounting policies for cash and accrual-based accounting systems

Discuss the conditions for transitioning from cash basis to accrual basis accounting in a public sector entity.

Question

Required: Discuss FIVE (5) conditions for seamless transition from cash basis of accounting to accrual basis of accounting.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Accounting Transition, Accrual Basis, Cash Basis, Financial Reporting, Public Sector, Transition
Level: Level 2

Topic: Accounting policies for cash and accrual-based accounting systems
Series: JULY 2023

PSAF – Mar 2023 – L2 – Q1a – Accounting policies for cash and accrual-based accounting systems

Explains the assertion that cash basis information can be derived from accrual basis accounting and discusses how accrual accounting provides superior cash information.

Question

Answer

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Tags: Accrual Accounting, Cash Basis, Financial Reporting, IPSAS, Public Financial Management, Public Sector
Level: Level 2

Topic: Accounting policies for cash and accrual-based accounting systems
Series: MAR 2023

PSAF – March 2024 – L2 – Q1 – Accrual Basis Challenges and Measurement Objectives

Discuss the challenges in adopting accrual basis accounting and the objectives and bases of measurement in public sector financial reporting.

Question

Answer

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Tags: Accounting Standards, Accrual Basis Accounting, Financial Reporting, Measurement of Assets, Public Financial Management
Level: Level 2

PSAF – Nov 2021 – L2 – Q1a – Accounting policies for cash and accrual-based accounting systems

Explain the policy implications of adopting accrual-based accounting on four measurement bases in public sector accounting.

Question

Ghana is determined to implement an Accrual-based Accounting policy to enhance accountability and aid decision-making in the public sector.

Required:
Explain the policy implications on FOUR (4) measurement bases in public sector accounting as a result of the adoption and implementation of Accrual Based Accounting.

Answer

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Tags: Accrual Accounting, Measurement Bases, Policy Implications, Public Sector Accounting
Level: Level 2

Topic: Accounting policies for cash and accrual-based accounting systems
Series: NOV 2021

PSAF – May 2019 – L2 – Q1a – Accounting policies for cash and accrual-based accounting systems

Explain the key characteristics of commitment, accrual, and cash accounting bases used in public sector accounting.

Question

Answer

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Tags: Accrual Accounting, Cash Accounting, Commitment Accounting
Level: Level 2

Topic: Accounting policies for cash and accrual-based accounting systems
Series: MAY 2019

PSAF – April 2022 – L2 – Q5 – Accounting policies for cash and accrual-based accounting systems

Explain constitutional provisions on budgeting, the concept and benefits of Citizen’s Budget, the role of budget guidelines, and how to address financial transactions not covered by IPSAS.

Question

Required:
i) Explain TWO (2) provisions in the 1992 Constitution relating to budgeting. (4 marks)

ii) Explain Citizen’s Budget and identify THREE (3) of its benefits in Public Financial Management. (5 marks)

iii) Explain the role of budget guidelines in budgeting and identify FOUR (4) items of information to be expected in a budget guideline. (6 marks)

Required:
Discuss how the matter can be dealt with by the management of the entity. (5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Budget Guidelines, Budgeting, Citizen’s Budget, Constitution, IPSAS
Level: Level 2

PSAF – May 2020 – L1 – Q1a – Accounting policies for cash and accrual-based accounting systems

Discusses the differences between cash accounting policies and accrual accounting policies concerning their recognition and treatment in financial statements for various accounting elements.

Question

Answer

Find Related Questions by Tags, levels, etc.

Tags: Accrual Accounting, Cash Accounting, Financial Statements, IPSAS, Public Sector Accounting
Level: Level 2

Topic: Accounting policies for cash and accrual-based accounting systems
Series: MAY 2020

PSAF – May 2018 – L2 – Q1d – Accounting policies for cash and accrual-based accounting systems

Contrast cash basis and accrual basis of accounting in terms of revenue recognition, expenditure recognition, non-financial asset disclosure, and depreciation.

Question

There are two main bases of accounting in the public sector, and these are cash basis and accrual basis. These two bases differ in many respects, though there are some similarities.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Accrual Basis, Cash Basis, Expenditure Recognition, Public Sector Accounting, Revenue Recognition
Level: Level 2