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AnswersAnswers: budget : budget classification, chart of classification, chart of

accounts and GFSaccounts and GFS

12-March-201012-March-2010Day 4, Exercises,Day 4, Exercises,

Questions/AnswersQuestions/Answers

By: CHE SavunBy: CHE Savun

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1. What is a Chart of 1. What is a Chart of Accounts?Accounts?

A chart of accounts is a systematic coding system for the classification and coding of transactions and events within

the accounting system

It defines the organization of ledgers used within the accounting system

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2. Why2. Why have a Chart of have a Chart of Accounts? Accounts?

• It is a systematic way to classify all financial It is a systematic way to classify all financial stocks and flowsstocks and flows

• It is simply a filing system for financial dataIt is simply a filing system for financial data

• A Chart of Accounts is the mechanism A Chart of Accounts is the mechanism through which financial information is through which financial information is collected, processed and reported oncollected, processed and reported on

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3. What3. What is a Budget is a Budget Classification?Classification?

A budget classification is a systematic coding A budget classification is a systematic coding system for the classification and coding of system for the classification and coding of transactions and events within the budget transactions and events within the budget

systemsystem

It defines the organization of ledgers used It defines the organization of ledgers used within the budget systemwithin the budget system

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4. Why have a Budget 4. Why have a Budget Classification?Classification?

• It is a systematic way to classify all financial It is a systematic way to classify all financial flows (often limited to cash transactions)flows (often limited to cash transactions)

• It is simply a filing system for financial dataIt is simply a filing system for financial data

• A budget classification is the mechanism A budget classification is the mechanism through which (cash based) financial through which (cash based) financial information is collected, processed and information is collected, processed and reported onreported on

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5. What is the difference 5. What is the difference between a CoAs and a Budget between a CoAs and a Budget Classification?Classification?

• In many countries the terms are In many countries the terms are interchangeableinterchangeable

• In some developing and transition countries In some developing and transition countries these terms have evolved to mean two these terms have evolved to mean two different systems for recording financial different systems for recording financial information – even though the two systems information – even though the two systems are closely related to one anotherare closely related to one another

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5. What is the difference between a 5. What is the difference between a CoAs CoAs andand a Budget Classification? a Budget Classification?

• Budget ClassificationBudget Classification- records cash or modified cash transactions- records cash or modified cash transactions

- is controlled centrally through a treasury- is controlled centrally through a treasury

- provides reports against budget appropriations or - provides reports against budget appropriations or estimatesestimates

-could easily be termed a cash-based chart of accounts-could easily be termed a cash-based chart of accounts

• Chart of AccountsChart of Accounts- generally uses modified accrual accounting- generally uses modified accrual accounting

- supports detailed account keeping in budget institutions- supports detailed account keeping in budget institutions

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6. BC and COA, which 6. BC and COA, which system is more important?system is more important?• Both are core elements of good practice public Both are core elements of good practice public

expenditure managementexpenditure management

• In fact, in many countries the two systems are In fact, in many countries the two systems are not separate but part of an integrated approach not separate but part of an integrated approach to public financial management:to public financial management: budget control and budget control and reporting is not separate from, but part of, accounting reporting is not separate from, but part of, accounting

• Thus, some countries choose to have two Thus, some countries choose to have two separate accounting systems with different separate accounting systems with different numbers, while others have a single integrated numbers, while others have a single integrated numbering systemnumbering system

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7. What is GFS?7. What is GFS?

• It is a statistical classification system It is a statistical classification system designed for the public sector by the IMFdesigned for the public sector by the IMF

• GFS 1986 - Cash-basedGFS 1986 - Cash-based

• GFS 2001 - AccrualGFS 2001 - Accrual

• COFOG - Classification of the functions of COFOG - Classification of the functions of GovernmentGovernment

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8. Why is GFS important?8. Why is GFS important?

• It provides a mechanism to create It provides a mechanism to create uniformity in public sector finances across uniformity in public sector finances across all countries’ public sectors all countries’ public sectors

• It assists within transition countries by It assists within transition countries by creating discipline around classification of creating discipline around classification of financial transactionsfinancial transactions

Budget Classification

General Chart of Accounts

GFS 2001

Consistency between Budget

Classification and COAsGFS -Template

for international comparison and

reporting

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Balance Sheet Statement of

Financial Performance

Operating Statement

Statement of Financial Activity

Equity Statement Cashflow Statement

The Four Primary Financial Statements under Accrual Accounting

Current Budget Classification

Full Chart of Accounts Current Budget Classification