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PSR Tutorial Question

The document discusses the differences between cash and accrual accounting policies, emphasizing their impact on financial performance and reporting in the public sector. It poses questions regarding the recognition and treatment of revenue, capital assets, allowances, provisions, and contingent liabilities under both accounting methods. Additionally, it explores the importance of the Conceptual Framework for financial reporting, constraints on information in reports, and the disagreement between finance officials on the most useful accounting basis.

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7 views2 pages

PSR Tutorial Question

The document discusses the differences between cash and accrual accounting policies, emphasizing their impact on financial performance and reporting in the public sector. It poses questions regarding the recognition and treatment of revenue, capital assets, allowances, provisions, and contingent liabilities under both accounting methods. Additionally, it explores the importance of the Conceptual Framework for financial reporting, constraints on information in reports, and the disagreement between finance officials on the most useful accounting basis.

Uploaded by

plug2303
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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TUTORIAL QUESTION TOPIC TWO

QUESTION ONE

Cash accounting policies and accrual accounting policies when applied respectively to the
same transaction or events of the same entity will produce different pictures of the financial
performance, position and cash flow information of the entity. Thus, the choice of
alternative policies needs to be given much consideration. The International Public Sector
Accounting Standards Board (IPSASB) permits the use of cash accounting policies whilst
encouraging the application of accrual accounting policies in the preparation of financial
reports for public sector.

Required:
Discuss the difference between cash accounting policies and accrual accounting policies
in terms of recognition and or treatment of the following in the Financial Statements:
i) Revenue
ii) Capital asset
iii) Allowances and provisions
iv) Contingent liability

QUESTION TWO
Some accountants hold the view that development of a Conceptual Framework for General
Purpose Financial Reporting (simply, the Conceptual Framework) in the Public Sector is
needless and a mere information overload on the Accountants. This argument is predicated
on the fact that the Conceptual Framework does not establish authoritative requirements for
financial reporting by public sector entities that adopts IPSAS, nor does it override the
requirements of the International Public Sector Accounting Standards (IPSAS) or the
Recommended Practice Guides (RPGs).

Required:
Explain five importance of Conceptual Framework on one hand and IPSAS in preparing
general purpose financial report.

QUESTION THREE
Explain THREE (3) constraints on information included in the General Purpose Financial
Reports

QUESTION FOUR
The Director of Finance and the Principal Spending Officer of a Public Sector Organization are
in disagreement as to which basis of accounting will provide the most useful information to the
users. The Principal Spending Officer strongly believes that whether an entity applies cash basis
or accrual basis, the effect is the same. The Director of Finance disagrees with him totally,
arguing that different accounting treatment applies to both and therefore affect the level of
disclosure in the financial report. The Director of Finance proceeded to illustrate his point by
drawing on the basis of accounting on these items in the financial statement:
i) Motor vehicle donated to the entity
ii) Revenue due but not received by the entity
iii) Furniture acquired in the current year
iv) Electricity consumed for the year but not paid to Electricity Company.

Required:
The Director of Finance has tasked you to present a brief paper on how the two accounting bases
would be applied in the treatment of items i) to iv).

QUESTION FIVE
In line with the Conceptual Framework for General Purpose Financial Reporting by Public
Sector Entities issued by International Public Sector Accounting Standards Board (IPSASB)
explain the difference, if any, between a General-Purpose Financial Report and a Special
Purpose Financial Report

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