PSAF REVISION DAY 2

QUESTION 1 The following balances were extracted from the books of KALOBA State
Government of OTAN as at December 31, 2015:
Dr Cr
N‟Million N„Million
Cash Account 60,000
Consolidated Revenue Fund as at January 1, 2015 120,000
Allocation from Federation Account 300,000
Other Revenue 40,000
Personnel Costs 150,000
Ordinary Shares of N1 each in AKRAN Plc 150,000
Deposits 60,000
Advances 80,000
Loans from Federal Government 60,000
Loans to Local Government 80,000
Fixed Deposit – LOBO Bank Plc 60,000
Total 580,000 580,000

Additional information:
(i) N40 billion should be transferred to Development Fund for Capital projects to be
embarked upon in the 1st quarter of 2016.
(ii) Other charges approved by the Fund Management Committee and paid during the
year but which were omitted from the books amounted to N50 billion.
(iii) Total grants of N100 billion collected from Federal Government for capital project to
be embarked upon in the 1st quarter of 2016 was not recorded anywhere in the
books.
Required: Prepare the following statements for submission to the Auditor-General for the State
a. i. Consolidated Revenue Fund Account for the period ended December 31, 2015. (8 Marks)
ii. Development Fund Account for the period ended December 31, 2015. (3 Marks)
iii. Statement of Assets and Liabilities as at December 31, 2015. (9 Marks)
b. State the components of General Purpose Financial Statements (GPFS) of a typical Federal or
State Government. (4 Marks)
c. State FOUR principal users of government financial reports and their needs. (6 Marks) (Total
30 Marks)

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(2) The following was extracted from the office of the Accountant-General of the
Federation for the month ended 31st March 2015
N’000
Capital Gains Tax 450,000
Companies Income Tax 300,000
Petroleum Profit Tax 2,105,000
Excise Duties 102,000
Import Duties 210,000
Export Duties 115,000
PAYE Deductions from the Emoluments of: -
– Armed Forces 12,000
- Nigeria Police Force 7,000
– Staff of Ministry of External Affairs 6,000
Residents of Federal Capital Territory 4,000
Rent of Government property 3,000
Interest on Investments 1,000
Re-imbursements 11,000
The following expenditure items and appropriations were effected during the
year: -
N’000
Transfer to Contingencies fund 25,000
Transfer from Contingencies fund 18,000
Transfer to Development fund 42,000
Recurrent Expenditure 830,000
Salaries and allowances of
a) Supreme Court Judges 22,000
b) Auditor-General for the Federation 4,000
c) Federal Court of Appeal Judges 18,000
d) Accountant-General of the Federation 5,000

You are required to prepare:

i. The Federation Account.
ii. The Consolidated Revenue Fund Account for the month of March 2015.
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QUESTION 3

(a) Describe a development plan. (5 Marks)

(b) Explain FIVE objectives of development planning. (10 Marks) (Total 15 Marks)

QUESTION 4 Discuss FIVE factors that have been responsible for the phenomenal increase in the size of
public expenditure in any developing economy. (15 Marks)

QUESTION 5

(a) State any five objectives of Budgetary Control. (5 marks)

(b) Explain briefly the following budgeting concepts:

(i) Rolling Budget

(ii) Perspective Planning

(iii) Periodic Budgeting

(iv) Flexible Budget

(v) Zero-Based Budgeting

SOLUTION TO THEORY PART

(a) A Development Plan is a specific set of quantitative and qualitative economic target to be achieved in
a given period of time. It is a conscious effort on the part of the central government of a country to
maximise the social and economic welfare of the people through efficient allocation of resources.

The main types of Development Plan are

(i) The Rolling Plan - A flexible medium-term plan rolled in the course of implementation overtime within
the framework of a perspective plan

(ii) The Medium-Term Plan – Covering five years.

(iii) The Perspective Plan – covering not less than fifteen years.

(b) The objectives of development planning include

(i) Efficient utilisation of resources to promote sustainable economic growth.

(ii) Equitable distribution of income to ensure that everybody has access to essential goods and services
as well as to reduce the gap between the rich and the poor.

(iii) Full Employment - To reduce the rate of unemployment to the barest minimum thus improving the
living standard of the people living in the country

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(iv) Macroeconomic Stability – To promote stability of prices of goods and services, interest rates,
foreign exchange of domestic currency thereby encouraging savings and investment.

(v) To diversify economic activities and develop the agricultural and industrial sectors

(vi) To prevent foreign control of the economy and promote self reliance.

The following factors have been responsible for the phenomenal increase in the size of public
expenditure in any developing economy:

i. Population growth: As the population increases, there will be an increase in the provision of social
amenities supplied by the Government; hence, an increase in government spending.

ii. Natural crisis or War: When there is national crisis, a lot of government funds are used in providing
arms and ammunition, training of soldiers etc. This will eventually increase the size of public
expenditure.

iii. Development Projects: Developing countries embark on development projects and technology which
require large government expenditure. Some of these development projects include construction of
dams, roads as well as agriculture.

iv. Increased Public Debt: In less-developed countries, there have been an increase in public debt which
makes the government to spend more on loan servicing and repayment.

v. Commitment to economic development: Governments of developing countries have realized the need
for development; therefore, governments desired to raise the level of productivity through spending on
social amenities.

vi. Urbanisation: This is a shift of the population from rural to urban areas which invariably increases the
expenditure of government as a result of the expansion of the existing amenities.

vii. Inflation: The rising general price level in the developing economy has the tendency of contributing
to the phenomenal increase in the size of public expenditure in nominal terms. makes the government
to spend more on loan servicing and repayment.

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