Summer Exam – 2009

(Suggested Solution)
Q.1: (a) Identify the following accounting transactions as per C.O.A.
(i) Personal pay of officer of Commissioner of Income Tax Zone ‘C’ Lahore.
(ii) Stationery purchased by the Additional AGPR, Sub Office, Lahore
(iii) Telephone charges paid by the Auditor General of Pakistan, Islamabad
(iv) Director Health Services Peshawar paid rent of office building
(v) AG Sindh, Karachi issued a cheque to IG Police for payment of Motor
Vehicle Registration Fee.
Required: Write the classification on the following format:
Q. No. Entity Element Object Element
Govt. Ministry Div. Deptt. Attached Distt. Accounting Major Minor Detail
Deptt. Element Object Object Object

Answer:
Entity Element Object Element
Q. No. Govt. Ministry Div Deptt. Attached Distt. Accounting Major Minor Detail
. Deptt. Element Object Object Object
1 F 08 1 - CBR1 LO A 01 1 02
2 F 08 1 - CGA1 LO A 03 9 01
3 F 08 1 - AGP1 ID A 03 2 02
4 P - - 64 5352 PW A 03 4 02
5 S - - 30 3007 KI A 03 6 03

Q.(b): Codify the following:

(i) Basic Pay (vi) G. P. Fund recovery (Advance)

(ii) Qualification Pay (vii) Income Tax deduction
(iii)Senior Post Allowance (viii) Group Insurance
(iv) H. R. Allowance (ix) Benevolent Fund
(v) Conveyance Allowance (x) House Building Advance

Answer:
(i) A Expenditure
A01 Employee Related Expenses
A011 Pay
A01101 Basic Pay
(Note: It is assumed that the given information relates to an officer)

(ii) A Expenditure
A01 Employee Related Expenses
A011 Pay
A01105 Qualification Pay
(Note: It is assumed that the given information relates to an officer)

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 (iii) A Expenditure
A01 Employee Related Expenses
A012 Allowances
A01201 Senior Post Allowance

(iv) A Expenditure
A01 Employee Related Expenses
A012 Allowances
A01202 House Rent Allowance

(v) A Expenditure
A01 Employee Related Expenses
A012 Allowances
A01203 Conveyance Allowance

(vi) G Liabilities
G06 Trust Account Fund
G061 Provident Fund
G06103 General Provident Fund (Civil)
(Note: A civil employee has been assumed)

(vii) B Tax Revenue

B01 Direct Taxes
B011 Taxes on Income
B01142 Deduction at Source under Section 50

Note: It is assumed that deduction has been made from a civil federal
government employee’s salary by AGPR. Had this been a deduction by
Provincial AG the head would have been as follows:
G Liabilities
G12 Special Deposit Fund
G127 Other Fund
G12713 Income Tax Deduction from Salaries

(viii) G Liabilities
G06 Trust Account Fund
G064 Insurance Fund
G06409 Federal Government Employees Group Insurance Fund (Civil)

(ix) G Liabilities
G06 Trust Account Fund
G062 Benevolent Fund
G06202 Federal Government Employees Benevolent Fund (Civil)

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 (x) E Capital Receipts
E02 Recoveries of Loans and Advances
E025 From Government Servants
E02501 House Building Advance

Q.2 Give object classification (double entry) as per chart of account

(i) Refund of Income Tax in the same Financial year for Rs. 5,000
(ii) Transfer of G. P. Fund balance from P.P.O to AGPR for Rs. 70,000
adjusted through Civil Account.
(iii) Exchange Account between Civil and Military for Rs. 10,000 credit in the
AGPR books.
(iv) House Building Advance of Rs. 500,000
(v) Refund of PWD Deposit Rs. 30,000

Answer:
(i) Refund of Income Tax in the same financial year for Rs. 5,000
As per para [Link] of the APPM, refunds paid for a receipt previously
recognized in the current financial year will be adjusted to reflect the correct
level of revenue, that is, as reduction in revenue. The following double entry
shall be made:

B01189 Deduct – Refunds / Rebate Dr 5,000

G01101 Cheque Clearing Account – Non Food Account Cr. 5,000
(To record refund of income tax paid in the same financial year)

(ii) Transfer of G. P. Fund balance from P.P.O to AGPR for Rs. 70,000
adjusted through Civil Account
PPO will send related detail of GPFund balance to AGPR. On exchange of
vouchers the entries will be as follows:

Books of P.P.O.
G06112 General Provident Fund (PPO) Dr 70,000
G10418 Exchange Account between Civil and Pakistan Post Cr. 70,000
(To recognize transfer of funds in PPO books)

Books of AGPR
G10418 Exchange Account between Civil and Pakistan Post Dr. 70,000
G06103 General Provident Fund (Civil) Cr 70,000
(To recognize balance in Civil Books)

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 (iii) Exchange Account between Civil and Military for Rs. 10,000 credit in the
AGPR books
Books of AGPR
Bank Account Dr. 10,000
G10419 Exchange Accounts between Civil and Defence Cr 10,000
(Recognition of recording of revenue in Civil Books)

Books of CMA
G10419 Exchange Account between Civil and Defence Dr. 10,000
Related revenue head Cr 10,000
(To recognize inter-entity transfer)
(Note: Related revenue head has not been mentioned in the question)

(iv) House Building Advance of Rs. 500,000

A08101 House Building Advance Dr. 500,000
G01101 Non Food Account Cr. 500,000
(To record payment of house building advance to government servant)

Besides the above, the following shall be recorded in the Appropriation

Control Register:
Update Funds available () 500,000
Update Appropriation Control () 500,000

(v) Refund of PWD Deposit Rs. 30,000

G10113 Public Works/Pakistan PWD Deposits Dr. 30,000
G10133 Other Departmental Cheques Cr. 30,000
(To record of refund of PWD Deposit)

Q.3(a) What are the typical characteristics of a development project?

Answer:
Characteristics of a Development Project: A development project is defined as a
scheme or activity provided within a development expenditure grant included in the
Schedule of Authorized Expenditure. Development projects typically exhibit the
following characteristics:
• a finite project life
• a nominated project manager
• a specified source of funding
• an approved project plan and budget
• specified deliverables.

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Q.3(b) Describe the main points of the various phases of budgeting cycle.
Answer:
Budgeting Cycle: The word budget is derived from French word “BOUGETTE” which
means small leather bag. In public sector, budget is an instrument by which the
Government expresses its priorities and allocates resources to implement its policies. It
applies to the Consolidated Fund only. The budgeting cycle consists of six phases

Overview of the Budgetary Cycle

Preparation

MoF/FD
Spending Ministries

Policy Setting Authorisation

Cabinet
Cabinet
National Assembly/
Provincial Assembly

Review Implementation

PAD MoF/FD
Spending Ministries
Spending Ministries Spending Ministries
PAD
Public Accounts Committee
Reporting
and
Monitoring

categorized as represented in the diagram. Each phase of the cycle is briefly described
below:

• Setting of budget policy and initiatives: The Cabinet determines the budget
policy, initiatives and priorities and communicates the same to ministries and
departments via Finance Division/Department.

• Preparation: This stage includes the preparation and submission of budget

estimates of expenditure and receipts by entities and subsequent review and

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 consolidation of estimates by the Financial Advisors (in the case of Federal
Government) and the Finance Division / Department.

• Authorization: This stage involves submission of Annual Budget Statement

before the National/Provincial Assembly. This consists of two stages: approval by
the National / Provincial Assembly, and authorization by the Prime
Minister/Chief Minister. The approved budget is referred to as the ‘Schedule of
Authorized Expenditure.

• Implementation: This stage refers to the communication of the budgets to the

spending ministries and departments via the Finance Division / Department and
the Financial Advisor in the case of Federal Government. On implementation of
the Budget, the entity can carry out activities and incur expenditure, for which
funding has been given in that period.

• Reporting and monitoring: Actual revenues and expenditures (including

commitments) are recorded and reported to monitor progress against budget
throughout the financial year. Reporting assists managers in decision making and
in particular re-allocation of funds where required. This includes the provision of
both internal and external reports.

• Review: The periodical review of financial performance and the achievement of

policy objectives by spending agencies and external review bodies. This includes
audit activities and review by Public Accounts Committee. At year end
outstanding commitments are reviewed and budget provision (through
supplementary grant) made for the following year.

Q.3(c)(i) What is commitment?

Answer:
Commitment: To ensure the matching of expenditure against appropriations, the cash
basis of accounting has been modified to recognize some items on expenditure on a
commitment basis. Commitment can be defined as an obligation to make future payment,
the funds for which are reserved against the allocated budget of an entity. Commitments
are used to control large and non-regular expenditures against appropriation, and need not
be recorded for immaterial expenditure of recurring nature. Commitments will be
accounted for on a memorandum basis in accordance with criteria provided in the APPM.

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Q.4(a) Differentiate among the following:
(i) Consolidated Fund and Public Account
(ii) Contingent liabilities and deferred liabilities
(iii) Self Accounting Entity and Exempted Entities

Answer:
(i) Consolidated Fund Public Account
• Refers to all revenues received • Refers to all other moneys received by
by the Federal / Provincial or on behalf of the Federal/Provincial
Government, all loans raised Government, other than the
and all moneys received in Consolidated Fund, or deposited with the
repayment of any loan by than Supreme Court or any other court
government. established under the authority of the
Federation.

• Federal / Provincial government • The Annual Budget Statement does not

is required to lay before the apply to the Public Account.
respective assembly, a
statement of estimated receipts
and expenditure for the
forthcoming financial year,
referred to as Annual Budget
Statement.

• Its sources comprise Capital and • The Public Account represents those
Revenue and the government monies for which the Government has a
can appropriate it for the fiduciary duty but which it is not at
general services of the liberty to appropriate for the general
government. services of the Government.

• Expenditure out of consolidate • The Public Account consists of trust

fund is distinguished as account and special deposit account.
Charged and Voted expenditure.
Further classified as Current or
Development expenditure.

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 (ii) Contingent liabilities Deferred liabilities
• These are not liabilities because • These are liabilities which arise when
there is no present obligation for monies raised from various savings
the government to pay for them. schemes and funds launched by the
Government are utilized in operation.

• These will become liabilities on • These liabilities are deferred in the sense
occurrence of the certain that they will be funded by future
contingent event hence referred revenues of the Government, and repaid
to as contingent liabilities. upon expiry of the relevant scheme or
fund.

• These are disclosed in the notes • These liabilities shall form part of the
to the financial statements. budgeting process in the subsequent
years.

(iii) Self Accounting Entity Exempted entities

• Any entity that performs its own • An entity outside the scope of the
accounting function and Manual of Accounting Principles and
maintains its own accounts, related manuals.
including certification,
authorization and issue of
payments.

• Any accounting entity for which • The entities which fall outside the
the Principal Accounting responsibility of the Controller General
Officer has primary of Accounts for accounting and
responsibility for the accounting reporting purposes.
and reporting function (i.e. as
opposed to the Controller
General of Accounts.

• Examples includes: • Examples includes:

o National Savings o WAPDA
o Pakistan Mint o OGDA
o Public Works Department o NHA etc
etc.

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Q.4(b): Which type of record for account is kept in an Accounts Office?
Answer:
The accounting records (manual or computerized) which need to be kept by the
DAO/AG/AGPR include the following:
• Monthly accounts • Liability Register
• Sub-ledger • Bank Reconciliation Statement
• General Ledger • Permanent Records (e.g.
• Budget Head Register Establishment Records, GP Fund
• Claim Register Ledgers)
• Certification and Authorization • Subsidiary Registers (e.g.
Register Contingent Register, Receipts
• Cheque Register Register)
• Various abstracts • Supporting vouchers and schedules.
• Physical Assets Account

Describe the stock taking procedure.

Answer:
Stock Taking Procedure:
The delegated officer(s) shall ensure that the balances recorded in stores accounts are
regularly checked by stocktaking, at least once in a year. The condition of goods should
also be examined. The immediate purpose of stocktaking is to deter and detect losses by
theft and fraud, to verify the accuracy of stock records, and to identify any weaknesses in
custody arrangements.

Q.5(a) Define the following:

(i) Fixed Assets
(ii) Financial Assets
(iii) Type/Categories of Assets

Answer:
(i) Fixed Assets:
Assets characterized 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.

(ii) Financial Assets:

A reporting classification of assets, used to describe cash held and any assets
readily convertible to cash. They include:
• Cash
• Current Assets
• Other Assets

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(iii) Type/Categories of Assets:
As per Chart of Accounts the assets have been broadly categorized as follows:
F01 Cash and Bank Balances
F02 Receivables
F03 Physical Assets
F04 Investments
F05 Other Assets

Q.5(b) Give the detail procedure for production of annual accounts.

Answer:
Production of Annual Accounts:
Each AG office and AGPR shall produce the Annual Accounts for the respective
Provincial and Federal Governments in accordance with the policy laid down in Chapter
7 of the APPM.

The Annual Accounts shall not be produced until the accounts have been closed for the
financial year, all end-of-year adjustments have been made and all Monthly Accounts
received by DAOs and self-accounting entities. The AG/AGPR must also produce the
Consolidated Monthly Accounts for June before producing the Annual Accounts.

The general procedure for each of the main components of the Annual Accounts is
provided below:

• Statement of Receipts and Payments - The information required for this

statement shall be obtained from the year-to-date information provided in the
Consolidated Monthly Accounts, and then classified according to the format set
down in the Financial Reporting Manual.

• Statement of Assets and Liabilities - This report shall be produced by

consolidating the cumulative balances held in the various assets and liabilities
accounts into the required classification and format, as set down in the Financial
Reporting Manual.

Separate statements of Assets and Liabilities will be produced for Government of

Pakistan (or Provincial Government as the case may be), and the various trust
heads and special deposit accounts held in the Public Account of each
Government.

A trial balance report shall be produced, indicating the closing balances of all
asset and liability accounts, at detail level for the Federal or Provincial
Government (as the case may be).

The trial balance report shall be reviewed by the Accountant General, and if
satisfied that no further adjustments are required, shall authorise the consolidated
statement of assets and liabilities to be produced.

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 • Cashflow Statement - this report shall be derived from the Statement of Receipts
and Payments, and presented in the format prescribed in Chapter 3 of the
Financial Reporting Manual.

• Production of Combined Annual Accounts of the Federation

The Auditor-General’s office shall prepare this report by consolidating the

financial information contained in each of the Annual Accounts prepared for the
Federal Government and each of the Provincial Governments.

This report shall include a consolidated statement of receipts and payments and a
consolidated statement of assets and liabilities, both in the required classification
and format, as set down in the Financial Reporting Manual. These statements
shall show, for each line item, the balances for each Government individually as
well as the total.

• Production of Annual Appropriation Accounts

The AGPR and each AG office shall produce Annual Appropriation Accounts in
accordance with the policy laid down in Section Error! Reference source not
found. of this Chapter.

The Annual Appropriation Accounts shall show separately:

• the Schedule of Authorised Expenditure for the year (both Original and
Supplementary)
• a summarised statement showing for each grant, the original,
supplementary and final budgets, the annual expenditure and variance
against final budget
• an appropriation statement for voted expenditures

The AG/AGPR shall only prepare the Appropriation Accounts once the Annual
Accounts have been finalised. The figures used for actual expenditures shall be
drawn from the Annual Accounts. The budget figures used shall be confirmed by
the respective Finance Division/ Department

The Annual Appropriation Accounts shall be signed-off by the Auditor-General,

once satisfied that proper audit has been carried out on these Accounts.

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Q.6. Identify as per SAP R/3 (CDA)
Answer:
(a) Form Codes (ID)
S. No. Description Code
(i) Physical Asset Register 13A
(ii) Liability Register 11A
(iii) Commitment Advice Form 4C

(b) Payment method codes

S. No. Description Code
(i) Payment through DDO Z
(ii) Transfer payment (Government Deposit) R
(iii) Cheque Payment (NDRA) T

(c) Detail abbreviation

S. No. Abbreviation Detail
(i) SE Self-Accounting Entity
(ii) I.A.S. International Accounting Standards
(iii) GAAP Generally Accepted Accounting Principles

(d) Pay scale type codes as per text

S. No. Text Code
(i) Civil Armed Forces P5
(ii) Judges P3
(iii) Special Group P4

(e) Job description codes as per job title

S. No. Job Title Code
(i) Cotton Commissioner 00001915
(ii) UDC (SG) 00002606
(iii) SAS Accountant 00001218

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