ADB Grant 0133-CAM: Public Financial Management in Rural Development Ministries (Component 1)

1. ADB Grant 0133-CAM: Public Financial Management in Rural Development Ministries (Component 1) Advanced Accounting 1 - The Conceptual Basis of Government Accounting Day 4: June 10, 2010: Case Study ADB Grant No.0133-CAM/Component 1: PFMRD

2. Case Study – Accrual Accounting: The Cambodian Water Company • At 1 January 2009 the Cambodian Water Companyhad the following balance sheet: • During 2009 the following transactions took place: • Depreciation is 10% per year, straight line basis. • PREPARE ACCRUAL ACCOUNTS for the year 2009. 2

3. Solution – Accrual Accounting: The Cambodian Water Company • First, write up the account for cash at bank: DEBIT (DR) CREDIT (CR) The bank balance has increased by 1,813,900.... From 20,000 to 1,834,900 3

4. Solution – Accrual Accounting: The Cambodian Water Company • Next, summarise the accounts for income and expenditure and compute the closing debtors and creditors. The income and expenditure figures go to the income and expenditure account. The closing balance figures go to the balance sheet. 4

5. Solution – Accrual Accounting: The Cambodian Water Company • Next, compute the figures for fixed assets, including depreciation. The Depreciation Expense figures goes to the income and expenditure account. The Fixed Asset Cost and Accumulated Depreciation figures go to the balance sheet. 5

6. Solution – Accrual Accounting: The Cambodian Water CompanyOperating Statement (Income and Expenditure Account) Notes: The Grant received is Income. The Loan received is not income, because it has to be repaid in the future, so it goes to the balance sheet as a Liability. 6

7. Solution – Accrual Accounting: The Cambodian Water CompanyBalance Sheet (Statement of Assets and Liabilities) 7

8. Solution – Accrual Accounting: The Cambodian Water CompanyCash Flow Statement 8

9. Quiz What does IASB stand for? What does IPSAS stand for? What are the three valuations methods for fixed assets? What are the two intermediate steps RGC can take to get from Full Cash accounting to Accrual Accounting? What are the reports you would expect to find in an Accrual Based Accounting System? How many IPSAS are there for Accrual Accounting and how many for Cash Accounting? What are the two different types of Financial Statements and who uses the Government’s General Purpose Financial Statements? What is the difference between Financial Accounts and Management Accounts? 9

10. Quiz - Answers What does IASB stand for? International Accounting Standards Board What does IPSAS stand for? International Public Sector Accounting Standards What are the three valuations for fixed assets? • Historical Cost Net Book Value • Economic Value – In use • Net Realizable Value 10

11. Quiz - Answers What are the two intermediate steps RGC can take to get from Full Cash accounting to Accrual Accounting? Modified Cash Basis & Modified Accrual Basis What are the reports you would expect to find in an Accrual Based Accounting System? Balance Sheet /Profit & Loss Statement / Cash Flow Statement How many IPSAS are there for Accrual Accounting and how many for Cash Accounting? 30 + 1 What are the two different types of Financial Statements and who uses the Government’s General Purpose Financial Statements? General Purpose Financial Statements & Special Purpose Financial Statements – the general public will use General Purpose Financial Statements What is the difference between Financial Accounts and Management Accounts? External users use Financial Accounts Internal users use Management Accounts 11