FORM TWO BOOK KEEPING STUDY NOTES TOPIC 4-5.

TOPIC 4: Government Accounting Terminology
Meaning of the term Accounting
Define the term accounting
Accounting is the systematic and comprehensive recording of financial transactions pertaining to a business. Accounting also refers to the process of summarizing, analyzing and reporting these transactions. The financial statements that summarize a large company's operations, financial position and cash flows over a particular period are a concise summary of hundreds of thousands of financial transactions it may have entered into over this period. Accounting is one of the key functions for almost any business; it may be handled by a bookkeeper and accountant at small firms or by sizable finance departments with dozens of employees at larger companies.
Meaning of the Term Accounting Officer
Explain the term accounting Officer
ACCOUNT OFFICER-government officers responsible with reporting and accountability.
-Is any officer appointed by the paymaster general pursuant to section 8 of the public finance act
-Accounting officers are normally the permanent secretaries of the respective ministry of Head of Department who are appointed by the permanent secretary in writing.
The Accounting Officer will be responsible for the following tasks and activities:
  • execute all accounting transactions and effect the necessary reconciliation of outstanding transactions;
  • recover amounts established as being receivable including the recovery of VAT from the host Member State;
  • prepare and present the Institute’s annual accounts and financial statements – both provisional and final - in line with the applicable financial regulations;
  • ensure that colleagues who need to use financial procedures are aware of them, understand them and correctly apply them;
  • validate the Institute’s accounting systems;
  • file and archive documents connected to the accounting function;
Meaning of the Term Sub-counting Officer
Define the term sub-accounting Officer
Meaning of the Term Collector of Revenue
Describe the term collector of revenue
Collector of revenue: responsible with collecting all revenue received by government
Meaning of the Term Authorized Officer
Explain the term Authorized Officer
An Authorized Officer is a member of a government who has been formally empowered by that entity to conduct government on its behalf, and to enter into borrowing arrangements with financial institutions.
Meaning of the Term Public Money
Describe the term Public Money
Public money is the money that is generated by the government to provide goods and services to the general public.
Meaning of the Term Exchequer Account
Explain the term Exchequer Account
Central Government current and capital account receipts and expenditure, tax and non-tax revenue receipts, departmental expenditure voted annually by the Dial, the sinking fund (a transfer from current account to capital account to reduce national debt) and other non-voted expenditure; current and capital account surpluses or deficits. Exchequer surplus or deficit, source and application of funds, total borrowings or repayments, total increase or decrease in exchequer deposits and other balances.
Meaning of Consolidated Fund
Explain the meaning of Consolidated Fund
Consolidated Fund of Tanzania is the most important of all government accounts. Revenues received by the government and expenses made by it, excluding the exceptional items, are part of the Consolidated Fund. <!-- [if !supportLineBreakNewLine]--> <!--[endif]-->
All government expenditure is made from this fund, except exceptional items which are met from the Contingency Fund or the Public Account. Importantly, no money can be withdrawn from this fund without the Parliament's approval.
The Meaning of Treasury
Describe the meaning of Treasury
Treasury : A government department related to finance and taxation.
Its responsibilities;
  • To develop and implement a macroeconomic and fiscal policy frame work for the United republic.
  • Ensure full and transparent accounts are from time to time made to the national assembly indicating the current and projected state of economy and the fiscal policy of the government.
Meaning of Paymaster General
Describe the meaning of Paymaster General
Is thememberof thegovernmentwho isofficiallyresponsiblefor makinggovernmentpayments.
The Meaning of Account Year
Explain the of Account Year
An accounting year is the period of time over which a government gathers and organizes its financial activity.
Controller and Auditor General:
Its responsibilities;
  • To satisfy him that any proposed withdrawal from the consolidated fund is authorized by or provided by act of parliament.
  • Advice the government on the total revenues to be allocated to the public sector and the appropriate level of resources to be allocated to individual programmers within that sector.
Meaning of Special Fund
Describe the meaning of Special fund
The term special funds refers to those assets set aside by companies for a specific purpose, and unavailable for ordinary business operations. Special funds include cash set aside to meet a specific financial obligation in the near term, as well as those that might appear in the long-term investment section of the balance sheet.
Explanation
Companies will oftentimes set aside funds to ensure cash is available to meet near-term as well as longer-term financial obligations. When the obligation is near-term, the company will typically allocate cash to the fund. If the obligation is long-term in nature, the company may invest this cash so that income is earned on the asset until needed.
Near term obligations are typically those associated with normal business operations. The funds are classified as current assets on the balance sheet, and funding may consist of a bank account earmarked for a specific purpose. Examples of these special funds include:
  • Dividend Account: established when the company's board of directors declares the payment of dividends to shareholders, the money placed in the account is then used to pay the dividends owed.
  • Interest Expense: includes cash placed into an account that will be used to pay the interest due on the company's long-term debt.
  • Payroll Cash Account: typically consists of an imprest account that is replenished prior to each pay period, and contains sufficient cash to pay salaries and wages due employees.
  • Petty Cash Fund: a small account used to pay for miscellaneous expenses such as delivery charges, supplies, and other items too small in value to justify issuing a check.
Companies may also set aside funds to pay for longer-term obligations. These funds may consist of securities that can generate income until needed, and are often times placed with a trustee that becomes the custodian of the account. As such, these assets would be classified as long-term investments on the balance sheet. Examples of these funds include:
  • Contingency Fund: established by companies to pay for unanticipated expenses, emergencies and other financial crises.
  • Plant Expansion Fund: used to pay for the eventual purchase, expansion, or construction of a manufacturing plant or facility.
  • Sinking Fund: established for the purpose of paying holders of long-term debt the principal amount due when the securities mature.
  • Stock Redemption Fund: used to repurchase or retire capital stock from shareholders; these redemptions typically involve preferred stock.
TOPIC 5:  Sources Of Government Funds And Expenditure Estimates
Sources of Government Funds and Expenditure Estimates
Indentify sources of government funds and Expenditure Estimates
Government revenue refer to the income generated by the government through various income sources inside and outside the particular government, As to any other person one will be eager to know where government earn money to finance its activity as well as expenditure of the government. The following are the source of revenue of various government including united republic of Tanzania (URT) :-
  • Taxation, Like we have discussed in the previous tutorial that taxation is a compulsory levy imposed by the government where by no direct benefit citizen will receive from the government, The levy is usually payable by citizen at different rate depending on the nature of economic activity conducted by an individual or firm the obtained amount is the revenue for the government and is used to meet various expenditure causing taxation to be the first source of government revenue.
  • FEES, These are payment made by users of public services on government cost sharing in health and education, That is to say the payment made by user of public services i.e health and education is not the actual cost that they were required to pay rather than contribution on cost already payable government.
  • FINES, Refer to the penalties imposed by government against law breaches,i.e any person or firm which ha been proved guilt by law must be exposed to specific fine as the compensation for the destruction made by a person or firm and the collected amount being the revenue for the government
  • GRANTS, Refer to non-payable money provided by the government to another government with the aim of helping such government either to improve or to start a project which are of great importance.to the society of such government.
  • FOREIGN INVESTMENT, Sometime government may decide to invest beyond its boundary provided there is a proof for sustainable and profitable cash flow, the obtained amount after operation being the revenue for particular government.
Other sources are: revenue obtain from borrowing, grants, Divident etc
Distinguish between revenue and capital expenditure estimates
Difference between Revenue and Capital Expenditure Estimates
A capital expenditure is an amount spent to acquire or improve a long-term asset such as equipment or buildings. Usually the cost is recorded in an account classified as Property, Plant and Equipment. The cost (except for the cost of land) will then be charged to depreciation expense over the useful life of the asset.
Revenue expenditure is an amount that is expensed immediately—thereby being matched with revenues of the current accounting period. Routine repairs are revenue expenditures because they are charged directly to an account such as Repairs and Maintenance Expense. Even significant repairs that do not extend the life of the asset or do not improve the asset (the repairs merely return the asset back to its previous condition) are revenue expenditures.
Thus, the differences between these two types of expenditures are as follows:
  • Timing. Capital expenditures are charged to expense gradually via depreciation, and over a long period of time. Revenue expenditures are charged to expense in the current period, or shortly thereafter.
  • Consumption. A capital expenditure is assumed to be consumed over the useful life of the related fixed asset. Revenue expenditure is assumed to be consumed within a very short period of time.
  • Size. A more questionable difference is that capital expenditures tend to involve larger monetary amounts than revenue expenditures. This is because expenditure is only classified as a capital expenditure if it exceeds a certain threshold value; if not, it is automatically designated as revenue expenditure. However, certain quite large expenditures can still be classified as revenue expenditures, as long they are directly associated with sale transactions or are period costs.

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