Ch8. Financial Accounting Techniques

8/12/2019 Ch8. Financial Accounting Techniques

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CHAPTER 8

FINANCIAL ACCOUNTINGTECHNIQUES

MAJOR TECHNIQUES IN PUBLICSECTOR ORGANIZATIONS

1 All five techniques canbe implemente alt!"ethe# in!ne !#"ani$ati!n %n!tmutuall& e'clusive(

)*+,-+-),

MAJOR TECHNIQUES IN PUBLICSECTOR ORGANIZATIONS

1 .u"eta#& Acc!untin"

2 Cash Acc!untin"3 Acc#ual Acc!untin"4 C!mmitment Acc!untin"5 Fun Acc!untin"

BUDGETARY ACCOUNTING

Purpose

1 Use t! #ec!# the bu"eta#& infl!/san !utfl!/s estimate !# auth!#i$e in theannual bu"et

Accounts

1 Estimate 0evenues1 Estimate Othe#Financin" S!u#ces

2 App#!p#iati!ns1 Estimate Othe# Financin" Uses3 Encumb#ances


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E

Budget Approved on 1-1-2008

Estimate 0evenues

Estimated Revenues Ledger

Ta'es

Licenses an 2e#mits

Inte#"!ve#nmental 0evenues

Cha#"es f!# Se#vices

Fines an F!#feits

3iscellane!us 0evenues

AppropriationsLedger:

Gene#al G!ve#nment

2ublic Safet&

*452ublic 6!#7s

Cultu#e an 0ec#eati!ns


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E'amples !f .u"eta#& C!nt#!l8C!mmitment Acc!untin"

2#inte# is #eceive !n ,4,54-))91incluin" shippin" cha#"es !f :,58

Entry in GF General Journal8

D

r.

r

.

0ese#ve f!# Encumb#ances;-))9

5

)

)

E'penitu#es;-))9

5,5

Encumb#ances;-))9

5

)

)

5

,

5

*4=


1 2e#masalahan alam

a7untansi an""a#an8

1 a""#e"ati!n

2


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)*+,-+-),*


1 .u"et functi!n8

1 Deter!ine t"e revenuesource and allocation o# eac"revenue account.

%e>"8 Ta' 0evenue1

Inte#"!ve#nmental t#ansfe#(>

2 $o di##er so!e pu%licservices. %e>"8H!/ much bu"et/e all!cate t! health epa#tment1c!mpa#e t! the eucati!n ep ? h!/much bu"et /e all!cate t! sala#&1c!mpa#e t! t!!ls1 etc(


1 A""#e"ati!n8

1 The fallac& 8 N!t all numbe#s sh!/in financial statement sh!/ the t#uemeanin"

2 The numbe#s c!me up f#!m al!t !f /!#7 ivisi!n1 s!me !f /!#7ivisi!n ma& be p#!fitable1 buts!me /!#7 ivisi!n l!ss

3 If /e a#e ma7in" @ust !ne sin"le

bu"et1 /ith !ne sin"le numbe#1 thea""#e"ati!n /ill be a p#!blem

CASH ACCOUNTING

1 Acc!untin" s&stem that!nl& #ec!"ni$e cash infl!/ ancash !utfl!/

1 Cash infl!/ 0evenue2 Cash !utfl!/ E'pense

2 Ientificati!n8

1 Cash fl!/2 T! measu#e an #ec!#1 /e use !nl&

a sin"le cash b!!7 !# t#easu#& b!!7

3 N! balance sheet


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CASH ACCOUNTING

1Avanta"e !f Cash Acc!untin"8

1 Simple2 L!/e# aminist#ati!n c!st

3 Hi"he# #eliabilit&

ACCRUAL ACCOUNTING

1Befiniti!n8

1 &'ecogni(e revenue )"en earned* e+penscost as incurred,

Foundations of Accrual Accounting

Revenue Recognition recognize revenues when

(1)Earned

(2)Realized or RealizableExpense Matching match with corresponding revenues -Product costs

-Period costs


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)*+,-+-),*

CASH ACCOUNTING

1 Bisavanta"e !f cashacc!untin"8

1 Cash fl!/cant be use t!ete#mine

p#esent+pastpe#f!#mance

2 Eas& t! be manipulate

Accruals--Th C!r"rs#!"

Net=

Operating +Accrual

sIncome Cash lo!

Accruals and ash Flows --- M!ths

M!th" #ince compan! value depends on future cashflows$

onl! current cash flows are relevant for valuation%

1" M!th" All cash flows are value relevant%

2" M!th" All accruals accounting ad&ustments arevalue irrelevant%

3" M!th" ash flows cannot be manipulated%4" M!th" All income is manipulated%

5" M!th" 't is impossible to consistentl! manageincome upwards in long run%


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---AccrualsandashFlows (ruths

$ (ruth" Accrual accounting(income)is more

relevant than cash flow%$ (ruth" ash flows are more reliable thanaccruals%$ (ruth" Accrual accounting numbers are sub&ectto

accounting distortions%$ (ruth" ompan! value can be determined b!

usingaccrual accounting numbers%

)*+,-+-),

ase 'llustration -- Facts

1" Establish hospital and invest )*++ e,uit!

2" Purchase infus for ) each$ Fixed costs for tabung o.sigen of )/++

$ 0ariable costs for laboratorium of )+%* perpasien

$ ure 1 patient at )/+ each for cash

$ ure 1 patient at )/+ each on credit


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CashAcc!u"#%"&ase'llustration

#tatement of ashFlows

Receipts

PenerimaanPengobatan

Payments

Pembelian 'nfus

Pembelian 2.sigen

3ia!a laboratorium

(otal pa!ments

4et cash outflow

AccrualAcc!u"#%"&

ase'llustration


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i t y ,

D


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'UND ACCOUNTING

'u"( ) 'u"( * 'u"( +

A , - . ED A , - . ED

A , - .

ED

'u"( / 'u"( 0 'u"( 1

A , - . ED A , - . ED

A , - .

ED

'UND ACCOUNTING

Fun Acc!untin" Equati!n8

ASSET = LIABILITIES + FUND EQUITY

as" AccountingJournal Accrual Accounting

Journal

B#> Cash B#> CashC#> 0evenue C#> 0evenue

B#> E'pense B#> Sala#ies E'pC#> Cash C#> Cash

B#> E'pense B#> T#uc7C#> Cash C#> Cash

B#> Cash B#> Cash

C#> 0evenueC#> 2a&able %A+21 N+21Bebt(

B#> 0ent E'pense B#> 2#epai 0entC#> cash C#> Cash


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)*+,-+-),*

'UND ACCOUNTING

1 %!"pendable #und(

2 %$one"pendable #und(

JOURNAL ENTRIES

CASH 2S ACCRUAL

ACCOUNTING

1 C!llect ta'pa&ment f#!m ta' pa&e#am!unte : =5>)))

2 2a& a publicse#vant sala#& f!# :5>)))

3 2u#chase a t#uc7 f!# : *5>)))

4 .!##!/ m!ne& f#!m I3F : ,->5))

5 2a& builin" #ent f!#- &ea#s am!unte : -)>)))

ED F /AP$E' 8


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Ch8. Financial Accounting Techniques