Accounting Policies & Procedures Mannuals 3

2          Overview

Table of Contents

 

 

 

2.1     Introduction                                                                                                                                                                  2.3

2.2     Organisational Structure of the Accounting System                                                                                          2.4

2.2.1        Accounting entities                                                                                                                                           2.4

2.2.2        Responsibilities                                                                                                                                                  2.4

2.3     The Accounting System                                                                                                                                             2.8

2.3.1        Key principles of the accounting system                                                                                                      2.8

2.3.2        Key accounting control objectives and respective controls                                                                      2.8

2.3.3        Key reporting control objectives and respective controls                                                                        2.11

2.4     Outline of Chapters                                                                                                                                                  2.13

2.5     Abbreviations                                                                                                                                                             2.15

2.6     Definitions                                                                                                                                                                 2.17

2.1              Introduction

2.1.1.1          This chapter sets out in overview both the organisational structure and the system of accounting to be followed by the Federal and Provincial Government.

2.1.1.2          This chapter also provides a brief overview of each chapter within the Manual.

2.2              Organisational Structure of the Accounting System

2.2.1          Accounting entities

2.2.1.1          The Government of Pakistan includes both the Federal and Provincial Governments.

2.2.1.2          There are four Provincial Governments (Balochistan, NWFP, Punjab and Sindh) and the one Federal Government.

2.2.1.3          The Federal Government of Pakistan and the Governments of each of the Provinces are separate accounting and reporting entities.  Each government operates separate bank accounts with the State Bank of Pakistan.

2.2.1.4          Within the Federal and Provincial Governments there are both centralised and self-accounting entities.

2.2.1.5          A centralised accounting entity is any accounting entity for whom the AG/AGPR has the primary responsibility for the accounting and reporting of that entity.  The centralised accounting entity operate through their respective single bank account called “Non-Food Account 1” which is controlled by AG/AGPR.

2.2.1.6          A self-accounting entity is any accounting entity for whom the Principal Accounting Officer has primary responsibility for the accounting and reporting functions (e.g. Forest).  Self-accounting entities maintain their own accounting records and submit monthly accounts in the prescribed form to the Accountant General’s offices for consolidation.  Self-accounting entities do not necessarily operate through the same bank account as centralised accounting entities, such as Railways and Food.  Some operate through an assignment or personal ledger account, while others operate the same bank account.

2.2.1.7          Additionally there are government entities which are exempt (as listed in Manual of Accounting Principles (MAP) Schedule 2)

2.2.2          Responsibilities

2.2.2.1          The Constitution of Pakistan sets out the primary accounting requirements of the governments and the role and responsibilities of the Auditor-General.  Refer to the MAP for more detail.

2.2.2.2          The Government’s accounting function is structured as a hierarchy with four levels.

2.2.2.3          First of all, the Auditor-General, has overall responsibility for the accounts of the Federal Government and the accounts of each of the Provincial Governments.. The Auditor-General additionally provides the Combined Annual Accounts of the Federation and the Annual Appropriation Accounts to the President.  In the case of the Provincial Government Appropriation Accounts are submitted to the relevant Governor.

2.2.2.4          The relationship between the Auditor-General , having ultimate responsibility, and the other levels is structured through a scheme of delegation of authority and reporting lines.

2.2.2.5          Secondly, the Accountant General Pakistan Revenues and the Accountants General are responsible for transactions at the Federal and Provincial Government level.

2.2.2.6          The Accountant General Pakistan Revenues (AGPR) is responsible for the centralised accounting and reporting of federal transactions.  Additionally the AGPR is responsible for the consolidation of summarised financial information prepared by federal self-accounting entities.  The AGPR receives accounts and reports from the DAOs, PAOs, Federal Treasuries and SBP/NBP, and provide Annual Accounts (to the AGP) and Consolidated Monthly Accounts (to the Federal Finance Division).  There are AGPR sub-offices in each of the Provinces who also act as the DAO in respect of Federal Government transactions relevant to the Provincial Headquarters.

2.2.2.7          Each Accountant General (AG) is responsible for the centralised accounting and reporting functions within their respective Province, under the authority of the Auditor-General.  Additionally the Accountant General is responsible for the consolidation of the summarised financial information prepared by provincial self-accounting entities. They receive accounts and reports from the DAOs and  PAOs, and provide Annual Accounts (to the AGP) and Consolidated Monthly Accounts (to the Provincial Government, through the Provincial Finance Department).  In addition each Accountant General also acts as the DAO in respect of the Provincial Headquarters.

2.2.2.8          There is a Principal Accounting Officer (PAO) in each Ministry/Division/Department.  Within self-accounting entities the PAO has been delegated the authority by the MoF for the accounting functions and for preparing accounts for submission to the Accountant Generals.  The PAO has the authority to control the financial management of the entity under him/her, within the limits prescribed by the Government.  They also reconcile accounts with the AG/AGPR offices.

2.2.2.9          Thirdly, the District Account Officers are responsible for the accounting functions of the districts.  Each province is divided into districts.  NWFP also have district agencies for tribal areas, which are separately funded by the Federal Government.  The DAOs have the authority to pre-audit bills, issue payments and record government transactions at a district level.  They receive reports from the DDOs and bank scrolls from the SBP/NBP and prepare reports for submission to the AG/AGPR offices.  The DAO perform the above mentioned functions for both Federal and Provincial transactions occurring within his/her District.  Separate accounting records are maintained for Federal and Provincial transactions.  In turn the DAO reports both to the AG and AGPR sub-office.

2.2.2.10          As well as DAOs, departmental treasuries are established to record specific accounting transactions, such as Income Tax, Sales Tax, Customs and National Savings Treasuries. 

2.2.2.11          Fourthly, the Drawing and  Disbursing Officers (DDO) are responsible for the accounting, cash and personnel functions of specific entities within departments.  Each district contains a number of entities  each having a DDO.  The DDOs have the authority to submit bills for pre-audit to the DAOs, and report to both the DAO of the district and the PAO of his/her entity/department.

2.2.2.12          At both the Federal and Provincial level, the Government’s banker is the State Bank of Pakistan, with National Bank of Pakistan acting as its agent.

2.2.2.13          Overview of the accounting organisational structure.

 

          

2.3              The Accounting System

2.3.1          Key principles of the accounting system

2.3.1.1          The key aspects of the accounting system shall be:

·        double entry bookkeeping

·        modified cash basis of accounting, record accounting transactions as per cashflow, with the following modifications:

                                                           

                                                            - commitment accounting, recognise and record significant                                                         commitments as they arise, through a purchase order or                                                             other legally binding contract

 

- accounting for certain assets and liabilities,.  At period end disclosure of all material assets and liabilities, in the Annual Accounts

 

- physical asset accounting, systematically recognising the acquisition of physical assets, using asset registers in accounts offices.

2.3.2          Key accounting control objectives and respective controls

2.3.2.1          The following key control objectives and their respective controls are essential to the system of accounting operated at all levels in the Federal and Provincial Government.  The controls detailed are in approximate chapter order.  Some controls will meet a number of control objectives.

2.3.2.2          Accuracy:  the information in the accounts and the supporting subsidiary records shall be accurate, representing the actual substance of past events, without undue errors or omission. This shall include correct and consistent classification of transactions and the recognition of revenues and expenditures in the correct time period.  This objective shall be addressed by:

·        budgetary control procedures

·        a proper approval, certification and authorisation process for payments

·        review and authorisation of payroll schedules by a delegated authority

·        reconciliation of cheque/transfer advice to claim prior to signing by authorised signatory

·        reconciliation of tax revenue receipts to tax authority records

·        a regular, complete and up-to-date bank reconciliation

·        procedures and control for recording inter-entity transactions

·        maintenance of physical assets register

·        performance of regular stocktakes

·        control over maintenance of permanent accounting records

·        procedures and control for making adjustments to accounting records

·        reconciliation of the general ledger to sub-ledgers, registers and source documents

·        detailed Chart of Accounts for classifying transactions

·        a regular post-audit process, both internal and external

2.3.2.3          Completeness: the information in the accounts and the supporting subsidiary records shall be a complete representation of all past transactions that have occurred during the reporting period.  This objective shall be addressed by:

·        budgetary control procedures

·        recognition of significant commitments, using a commitments register

·        regular checks for transactions not brought to account, using an outstanding claims register

·        reconciliation of tax revenue receipts to tax authority records

·        issue and review of sequentially numbered receipts for all revenue

·        money shall in general be received by SBP/NBP

·        regular, complete and up-to-date bank reconciliation

·        physical assets shall be recorded in a register disclosed in a memorandum account

·        regular and systematic, review and clearance of suspense accounts

·        reconciliation of general ledger to sub-ledgers, registers and source documents

·        a regular post-audit process, both internal and external

·        a systematic and verifiable consolidation of accounts from subsidiary ledgers, registers and source transactions.

2.3.2.4          Existence/Validity:  all transactions accounted for must be genuine transactions.  This objective shall be addressed by:

·        a proper approval, certification and authorisation process for payments

·        claims shall be stamped as paid on authorisation for payment

·        audit trail from the payment to the source documents supporting the claim

·        review and authorisation of payroll schedules by a delegated authority

·        reconciliation of cheque/transfer advice to claim prior to signing by the delegated authority

·        no duplicate receipts provided

·        regular, complete and up-to-date bank reconciliation

·        performance of regular stocktakes

·        maintenance of physical assets register, including procedure for disposal and existence checks of assets

·        a regular post-audit process, both internal and external.

2.3.2.5          Economy:  the accounting system shall include controls to ensure the prudent allocation of government resources.  This objective shall be addressed by:

·        expenditure approval, certification and authorisation procedures

·        a competitive procurement process

·        central purchasing facilities

·        asset management policies and procedures.

2.3.2.6          Effectiveness:  the accounting system shall include controls to ensure the effective performance of government responsibilities.  This objective shall be addressed by:

·        clearly defined responsibilities, scheme of delegation and reporting lines

·        comprehensive procedure notes

·        human resources program including recruitment, training and appraisal.

2.3.2.7          Efficiency:  in practice there will often be a trade off between economy and effectiveness.  The accounting system should seek to operate as efficiently as possible by optimising the relationship between these two variables.  This objective shall be addressed by:

·        pre-audit (certification) of payments.

·        issue of payment through direct bank transfer

·        use of imprest system for small payments

·        collection of revenue through SBP/NBP

·        hierarchical organisational structure in which there is a clear scheme of authority delegation to perform the tasks

·        responsibility accounting, using responsibility centres

·        production of annual and monthly financial reports

·        limited duplication of roles

·        consolidation of accounts.

2.3.2.8          Minimise risk of fraud and corruption:  the accounting system shall include controls to minimise the risk of fraud and corruption.  This objective shall be addressed by:

·        segregation of duties, so that certain accounting functions should be performed by different officers, including:

 

                                                            - accounts and audit

                                                            - recording of receipts and collection of money

                                                            - approval/authorisation and issue of payment.

                                                            - recording of expenditures and issue of payment

·        budgetary control procedures

·        pre-audit of claims for payment

·        maintenance of an authorised signatories list by the bank

·        requirement of a double signatory for issue of payment

·        issue of payment through direct bank transfer and cheques

·        maintenance of a physical assets register

·        performance of regular stocktakes

·        control over maintenance of permanent accounting records

·        procedures and control for making adjustments to accounting records

·        reconciliation of the general ledger to sub-ledgers, registers and source documents

·        responsibility accounting, using responsibility centres

·        clearly defined responsibilities, scheme of delegation and reporting lines

·        a regular post-audit process, both internal and external

2.3.3          Key reporting control objectives and respective controls

2.3.3.1          Sufficient:  the accounting system must produce sufficient information for the adequate control of the government’s finances.  This objective shall be addressed by:

·        preparation of monthly and annual accounts

·        availability of an audit trail through sub-ledgers, registers and source documents to substantiate the financial reports

·        preparation of additional operational information by entities as required

·        on-going review of information requirement by users.

2.3.3.2          Relevance:  the accounting system must produce financial information which is relevant and understandable to the users of the information.  The financial reporting from the accounting system must be based on the accountabilities required of users, and their decision making requirements.  This objective shall be addressed by:

·        on-going review of information requirement by users.

2.3.3.3          Reliable:  the accounting system shall produce reliable financial information.  This objective shall be addressed by the controls over completeness, accuracy and validity.

2.3.3.4          Consistency:  the accounting system must enable consistent information to be produced in financial reports, in order to be useful for decision making.  This objective shall be met by:

·        a consistent reporting period and unit of currency

·        consistent accounting basis and policies

·        consistent reporting formats and disclosures

·        accounting policies consistently applied across all government entities.

2.4              Outline of Chapters

2.4.1.1          This manual is structured according to the major financial management activities of the Government.  A summary of these chapters is provided below:

·        Introduction: introduction to the Manual, detailing its purpose, structure and applicability

·        Overview: overview of the accounting organisational structure and system

·        Budgetary control: overview of the budgetary cycle and the detailed procedures involved in policy setting and the preparation, authorisation, implementation, reporting, monitoring and review of budgets

·        Expenditures:  policies, accounting treatment and procedures to be applied for expenditures, and all stages of payment processing.  The chapter also includes procedures for specific types of payment and maintenance of permanent records

·        Receipts:  policies, accounting treatment and procedures in relation to receipts

·        Bank reconciliation:  policies and procedures for the bank reconciliation

·        Financial reporting procedures:  procedures for the preparation and consolidation of accounts, including periodic adjustments and annual financial statements

·        Loss and recoveries of public money:  write-off and recoveries of public money, also recovery of amounts owed on account of loans and advances given to provincial government, local bodies and government employees which are outstanding

·        Self-accounting entities:  policies, accounting treatment and reporting for self-accounting entities

·        Project accounting:  policies and procedures for development projects

·        Accounting for liabilities:  procedures relating to public debt transactions undertaken by the Government, including internal and external borrowings

·        Transactions between government entities: policies, accounting treatment and procedures for transactions between Government entities

·        Procurement and asset management:  accounting policies and procedures relating to Government procurement, including purchasing, management and disposal of stores and physical assets

·        Public account transactions:  describes the public account and deals with specific aspects of the public account not previously covered in the Manual

·        Insurance:  accounting policies in relation to insurance

·        General accounting: procedures for the recording and maintenance of Government records.  Includes use of suspense accounts and control of official forms and chequebooks

·        Assignment accounts and personal ledger accounts:  policies and procedures relating to usage of assignment accounts and personal ledger accounts.

2.5              Abbreviations

 

            The following abbreviations are used in the Manual:

 

                        AG                               Accountant General

 

                        AGP                            Auditor-General of Pakistan

 

                        AGPR                          Accountant General Pakistan Revenues

 

                        APPM                         Accounting Policies and Procedures Manual

 

                        CBR                            Central Board of Revenue

 

                        CG                               Comptroller-General

 

                        CMA                           Consolidated Monthly Accounts

 

                        CoA                             Chart of Accounts

 

                        CQA                            Consolidated Quarterly Accounts

 

                        DAO                            District Accounts Office/Officer

 

                        DDO                            Drawing and Disbursing Officer

 

                        DGPR                          Director General Pakistan Revenues

 

                        EAD                            Economic Affairs Division

 

                        FRM                            Financial Reporting Manual

 

                        IAS                              International Accounting Standards

 

                        GAAP                          Generally Accepted Accounting Principles

 

                        GFS                             Government Financial Statistics

 

                        GoP                             Government of Pakistan

 

                        MAP                            Manual of Accounting Principles

 

                        MDB                           Main Designated Branch

 

                        MDMBS                      Monthly Designated Main Branch Statement

 

                        MoF                            Ministry of Finance

 

                        NBP                            National Bank of Pakistan

 

                        NIS                              New Items Statement

 

                        PAO                            Principal Accounting Officer

 

                        PAC                            Public Accounts Committee

 

                        PAD                            Pakistan Audit Department

 

            SAE                             Schedule of Authorised Expenditure

 

            SE                                Self-Accounting Entity

 

                        SBP                             State Bank of Pakistan

 

                       

2.6              Definitions

 

The following are definitions of terms commonly used in this Manual:

 

abstract                                      An intermediate schedule prepared to facilitate the consolidation of financial information.

 

accounting entity                         This term includes the centralised accounts offices including the Executive Engineer of a public works division and the self-accounting offices.

 

accounts office                           This term identify the offices carrying out the accounting work and typically includes the offices of the DAO, AG and AGPR.

 

accounting period                       The time period over which financial information is reported, normally either a year or a month.

 

accounting policy                        A set of specific rules which defines how a particular transaction will be treated and accounted for in the books of accounts.  Where accounting policies are laid down in this manual, they always relate to specific treatment of a specific type of transaction.

 

accounting record                       Any document upon which accounting transactions are recorded or any other document issued or used in the preparation and processing of accounting transactions.

 

accrual accounting                      A method of accounting that recognises expenses when economic benefits have been consumed and revenues when economic benefits have been generated.

 

advance                                     An amount paid by the Government to a contractor/supplier for the purpose of securing goods or services; or an amount provided to a Government employee for a specified purpose, and to be adjusted as per terms and condition of the advance.

 

advice note                                 A list of authorised payments sent by an accounts office to a branch of the SBP or NBP.  (includes daily advice, payroll advice, pension advice, direct credit advice)

 

Annual Financial                         A set of financial reports, produced after the close of the

Statements                                 financial year by the Auditor-General of Pakistan for the Federal and each of the Provincial Governments.

 

appropriation                              An allocation of funds to a spending ministry or department on the basis of the Authenticated Schedule of Authorised Expenditure.

 

approval                                     The permission given by an authority or a delegated authority to undertake a particular action, such as incurring expenditure.

 

asset                                          Future economic benefits controlled by the entity as a result of past transactions or other past events.  (MAP, Section 3.3).

 

assignment account                     A Government bank account established with the NBP,  to provide independent drawing facility for nominated projects and other activities, within the prescribed limitation.

 

attached department                   A department which has direct relation with a Division and has been declared as such by the Federal Government and represented in the Chart of Accounts entity code.

 

audit trail                                    The capability to trace a particular balance from the financial statements down to its source documents (and vice versa), as evidence that the balance is complete and accurate.

 

authorisation                               (i) In accounting terms, the approval given by an authority or a delegated authority for a particular payment to be made.

 

                                                  (ii) In the context of the Budget, the process of passing the Annual Budget Statement through the legislature for approval.

 

the Bank                                    State Bank of Pakistan, or The National Bank of Pakistan, as an agent of the SBP, unless otherwise specified.

 

bank return                                 A batch of documents received from the bank including the bank scroll, supporting vouchers, paid cheques and other documents.

 

bank scroll                                 A daily advice received from a designated branch of the National Bank of Pakistan or State Bank of Pakistan, listing receipt collected and payments disbursed on behalf of the Government, against each of the Government bank accounts.

 

Budget                                       Defined in article 80 of the Constitution, a statement of the estimated receipts and expenditure of the Government for a financial year, referred to as the Annual Budget Statement.

 

capital expenditure                      (i) For the purposes of budgeting, expenditure met from capital receipts, as given by a particular grant number in the Chart of Accounts.

 

                                                  (ii) In accounting terms, expenditure incurred for the purpose of acquiring, constructing or enhancing physical assets or on schemes of capital outlay, as given by the object code in the Chart of Accounts.

 

capital receipt                             (i) For the purposes of budgeting, receipts obtained from sources of finance other than revenue (e.g. loans).

 

                                                  (ii) In accounting terms, receipts generated from the proceeds of sale of physical assets or receipts intended to set-off capital expenditure.

 

cash accounting                          A method of accounting that records cash payments and cash receipts only.

 

cash balance                               The amount held in a particular bank account at any point in time.

 

Cashflow                                    The net movement in the cash balance over a particular reporting period, given by the sum of payments and receipts.

 

Cashflow Statement                    A financial report provided to show the net movement in cash over a particular reporting period, showing how and where the cash has been applied.

 

cashflow forecast                        An estimate made of likely future cashflows based on historical patterns of expenditures and receipts, knowledge of expected payments (commitments) and collections (demands), changes in Government policy and other factors.

 

centralised                                  Any accounting entity for which the Accountant-General

accounting entity                         is responsible for the processing of its accounting transactions (e.g. certifying, authorising and issuing payments) and maintaining its accounts.

 

certification                                 A process undertaken by the DAO/AG/AGPR, including Executive Engineer of a public works division, involving verification (proper approval and validity)and audit (scrutiny against irregularities) of a payment prior to it being made. (previously referred to as pre-audit).

 

charged expenditure                   As defined in Article 81 of the Constitution, certain expenditures met from the Consolidated Fund, which may be discussed, but not submitted to the vote of the National Assembly (or Provincial Assembly in the case of Provinces).

 

chart of accounts                        A listing of codes  on the basis of which accounting transactions are classified to provide meaningful financial information.

 

claim voucher                             A document submitted by DDOs to the DAO/AG/AGPR office, containing the particulars of a valid and duly approved claim for payment against a nominated budget head. (previously referred to as a bill).

 

clearing account                          A type of General Ledger account which is used to transfer a balance from one entity or process to another (includes exchange and settlement accounts).

 

commitment                                An obligation to make a future payment, the funds for which are reserved against the allocated budget of an entity.

 

Consolidated Financial               A set of financial reports produced by the Pakistan

Statements                                 Audit Department which presents a consolidated summary of the Annual Accounts of the Federation and each Province.

 

Consolidated Fund                     Defined in Articles 78 and 118 of the Constitution, refers to all revenues received by the Federal/ Provincial Government, all loans raised and all moneys received in repayment of any loan by that Government.

 

Consolidated Monthly                The Monthly financial reports produced by the

Accounts                                    AG/AGPR,  which present a summary of the accounts of the Federation/Provinces.

 

consolidation                              Aggregation of information from several entities to present as if one entity, therefore eliminating transactions between the entities being consolidated.

 

contingent expenditure                All non-development expenditure, other than salaries and salary related expenditure.

 

control account                           A type of general ledger account which summarises a number of transactions from a subsidiary ledger into a single balance.

 

delegated authority                     An officer formally empowered by the responsible authority to perform a particular function.

 

department                                 The equivalent level of a Division, in the case of Provincial Governments, as given by the Rules of Business and listed in the Chart of Accounts entity code.

 

development expenditure            Expenditure provided in grants, relating to development projects.  Development projects are projects undertaken to acquire, build or improve physical assets or develop human resources.

 

direct credit                                A facility provided by the banks which allows salaries and other employee related payments to be made directly into the bank accounts of those persons, without the need for an exchange of physical cash or cheques.

 

disclosure                                   Display of financial information in a supplementary note to the financial statements, rather than in its main body, in order to provide further detail about a particular item.

 

district                                        A distinct region within a Province, as determined by the Government and shown in the Chart of Accounts entity code.

 

division                                         A self contained administrative unit responsible for the conduct of business of the Federal Government in a distinct and specified sphere and declared as such by the Federal Government and included in the Chart of Accounts entity code.

 

double entry system                    A system of recording accounting transactions which requires all journal entries (inputs) to the General Ledger to be in balance, i.e. total debits equal total credits.

 

entity                                          An organisational unit of Government.  This term can be applied to specific types of organisational units, depending on the context (i.e. self-accounting entity, centralised accounting entity, spending entity).

 

equity                                         An accrual accounting concept defined as the residual interest in the assets of an entity after the deduction of all its liabilities.

 

exchange account                       A General Ledger account through which transactions between centralised accounting entities and self-accounting entities of the Federal Government are recorded.

 

excess                                        An amount of expenditure exceeding the approved budget, which is  regularised through an Excess Budget Statement.

 

exempt entity                              Any entity outside the scope of the Manual of Accounting Principles and related manuals.

 

expense                                    (i) In accrual accounting, defined as a decrease in future

economic benefits in the form of reductions of assets or increases in liabilities of the entity, other than those relating to distributions to Government as owner, that result in a decrease in equity (MAP, Section 3.3).

 

(ii) In cash and modified cash accounting, defined as the outflow of cash arising as a result of payments issued in a given reporting period.

 

financial asset                             A reporting classification of assets, used to describe cash held and any assets readily convertible to cash.

 

financial year                              The financial year commencing 1 July and ending 30 June, consisting of twelve monthly periods.

 

fixed assets                                 Assets characterised by their long-term or strategic purpose. Fixed assets are usually physical in nature, such as plant and equipment, buildings etc.  In financial reporting, used synonymously with ‘non-financial assets’, because they are not readily convertible to cash.

 

flowchart                                    A graphical display used in these manuals and other documentation, to represent the flow of information and controls within a process or group of processes.

 

function                                      An element used in the Chart of Accounts, which provides financial information on particular economic activities, according to the International Monetary Fund’s Government Finance Statistics (GFS) classification scheme.

 

fund                                           A pool of money, set aside and used for an intended purpose, as provided by legislation or special orders (e.g. Consolidated Fund, trust fund).

 

funds available                            A term used in budgetary control to describe the remaining budget allocated to an entity, after deducting outstanding commitments and actual payments.

 

general ledger                             The primary ledger in which accounting transactions are recorded, in double entry format, and from which financial reports are produced.

 

general policy                             A set of general rules which defines how a transaction is treated in the books of accounts.  Unlike accounting policies, a general policy describes the overall treatment of a transaction.

 

grant                                          Funding provided to a Ministry or Department,  through the Schedule of Authorised Expenditure.

 

imprest account                          Petty cash system for making small payments.  Contains a set balance of cash which is subsequently replaced by petty cash vouchers on payment of cash.

 

internal controls                          A term used to describe the system of checks, reports and procedures that are enforced in an accounting system to protect against fraud and to ensure complete and accurate financial information is produced.

 

journal entry                               a uniquely numbered input voucher to the General Ledger, containing accounting transactions, used in the double-entry recording system. 

 

liability                                        Future sacrifices of economic benefits controlled by the entity as a result of past transactions or other past events.  (MAP, Section 3.3).

 

materiality                                   An amount is material to the accounts if its omission or misstatement is likely to influence the economic decisions made by the users of the information.

 

memorandum account                 An account maintained separately to the General Ledger but still operated within the internal control process.  Information recorded in memorandum accounts is used to provide supplementary information to the Financial Statements.

 

modified cash                             A method of accounting in which all cash payments and receipts are recorded, along with certain assets and liabilities/commitments

 

non-development                        Expenditure provided for in grants, relating to the on-going costs of Government, such as salaries and allowances of employees and contingent expenditures.

 

object                                        A Chart of Accounts element used to classify financial information according to the IAS accounting requirements (e.g. asset, liability, revenue, expenditure, equity), and provide sub-classifications therein (e.g. salaries, travel, transport).

 

obligation                                   Obligation in the context of commitment means the legal requirement to honour the terms of a contract rather than the term “commitment” which is used in its accounting context.

 

payroll section                            The section within the DAO responsible for preparing the payroll.

 

permanent record                       A record required to be maintained in order to generate accounting transactions, but is not in itself a transaction.  (e.g. payroll records, GP fund records. pension records).

 

personal ledger                           A ledger account maintained by the DAO/AG/AGPR, established as a drawing facility for nominated purposes.

 

Public Account                           Defined in Article 78 of the Constitution, all other moneys received by or on behalf of the Federal Government, other than the Consolidated Fund, or deposited with the Supreme Court or any other court established under the authority of the Federation.

 

public debt                                 The total liability arising from the borrowings of the Government, including both domestic loans and foreign (or external) loans.

 

receipt                                        (i) An amount of cash collected or the process of collecting money.

 

                                                  (ii) An official document provided to a payer, as proof that money was received.

 

receipt voucher                           A form with which amounts collectable by the Government are deposited with the bank, containing the particulars of the receipt. (previously referred to as a challan).

 

recognise                                    Reported on, or incorporated in amounts reported on, the face of the financial statements of the entity.

 

reconciliation                              A process of substantiating recorded financial information against an alternative source of data (e.g. bank reconciliation, reconciliation between accounts offices and spending departments).

 

release                                       A sanction given by Ministry of Finance, permitting a particular budgetary allocation to be spent, on the basis of cash being available.

 

revenue                                      (i) In accrual accounting, defined as increases in future economic benefits in the form of increases or enhancements of assets or decreases of liabilities, other than those relating to contributions by the Government as owner, that result in an increase in equity. (MAP, Section 3.3).

 

(ii) In cash and modified cash accounting, defined as an inflow of cash, arising as a result of collections received in a given reporting period.

 

self-accounting entity                  Any accounting entity that performs its own accounting function and maintains its own accounts, including certification, authorisation and issue of payments.

 

settlement account                      A General Ledger clearing account through which cash transactions between governments are recorded.

 

Special Deposits                         Accounts comprising of Public Account moneys that are

operated under the authority of Ministry of Finance, but are not trust accounts.

 

Statement of Assets and             A financial report consisting of balances of assets and

Liabilities                                    liabilities for an entity, as at a particular period end date.  Set out in the Financial Reporting Manual.

 

Statement of Revenues               A financial report consisting of balances of revenues and

and Expenditures                        expenditures for an entity, over a given reporting period.  Set out in the Financial Reporting Manual.

 

sub-ledger                                  Book of initial entry of all accounting transactions in a particular accounting office, for subsequent double entry into the General Ledger.

 

Supplementary Budget                Provided in Article 84 of the Constitution, an additional budget statement laid before Parliament, where funding for an existing service is insufficient, or the need for a new services has arisen which was not included in the original budget.

 

surrender                                    An amount included in the original approved budget, that is given back because it has not or will not be spent in the financial year by the entity.  

 

suspense account                        An account used if the correct head to be debited or credited is unable to be identified at the time of transaction, which shall be cleared once the correct head is identified.

 

Trust Account                            Legal entities in their own right, under the stewardship of the Government, and as such expected to produce financial statements in their own name.  Trust accounts are normally established under an Act of Parliament or Presidential Order.

 

voted expenditure                       As defined in Article 82 of the Constitution of Pakistan, that part of the Annual Budget Statement relating to other expenditure, submitted to the National Assembly in the form of demands for grants, on which the Assembly votes.