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Public Sector Accounting :Principles and Practice

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 }, lJCJuf Ole J. uthors

.""~Ueh~a· is emeEWly the !:lead Qf Accouat1U1CY

". ~ ~mte ¢ management andTeehno]ogyt IMTt Enngt1.
,. ._t.Q$ ,ELSe. Degree, a Masters Degree and Doctoral D~gree.
~)"
\:. .1
.'
.~,

'Hahas wlltt-enquite a number ofjournal articlesand text books. He is

au Assoctatemember of The Institute of Chartered Accountants
Ii:
i~.
{ACA). ;'
Heismarried withchildren.

. Lawyer C. Obara holds a Doctor of Philosophy Degree (Ph.D) in

Accountancy from the Rivers State University of Science and
; Tee:hnology, Nkpolu.Port Harcourt.

tle is a SeniorLecturer in the OepartI:n:ent ofAccountancy, Facuity of

" .~g~~i\lt . 8ciences,. Rivers State University -ofScieace and
TecJ$0J}(a~, :Port Harcourt. He is presently serving as the Head of
~p~arW!~ll!tofAcc@Qntaftcy.

ads also the ChiefConsultant ofGlobal Konsult, Port Harcourt.

.!i~ ~ras~~redlc(f~llthmed books as wen as contributed to several

~es; ilfaicc8:detnic journals and books 'Of reoompmAccountancy
·",ma~. .' ... ,
G.'is _ _ly~dwithchiI:dren:

@ ~:l~5:6~:·llllllll~!I~I!~~II}~~~}II!I~llmll
ii

Public Sector Accounting

Principles and Practice

Ani Wilson Uchenna

B.Sc., MBA, ACA
Senior Lecturer/Ag Head
Accounting Department,
Institute of Management and Technology,
Enugu.

Lawyer Chukwuma Obara

B.Sc., MBA, CPA, MNIM, MTFA, Ph.D.
Senior Lecturer
Department of Accountancy,
Rivers State University of Science and Technology,
Nkpolu, P.M.B. 5080, Port Harcourt.

Revised Edition
~

iii iv

Public Sector Accounting

Principles and Practice

First Published and Printed in 2002 by

THE BLUEPRINT LIMITED

Revised Edition Published in 2005 by

DavidStones Publishers Ltd.
#1 Nyeche Street, Mgbuoba,
Port Harcourt, Nigeria.
Tel: 08035.079193

© Ani Wilson Uchenna 2013

Accounting Department,
Institute of Management and Technology,
Enugu.

© Lawyer Chukwuma Obara 2013 w

Department of Accountancy,
Rivers State University of Science and Technology,
Nkpolu, Port Harcourt.

All Rights Reserved

No part of this publication may be reproduced, transmitted,

transcribed, stored in a retrieval system or translated into any
language or computer language, in any form or by any means,
electronic, mechanical, magnetic, chemical, thermal, manual or
otherwise, without the prior consent in writing of the Publishers. .
This book is sold subject to the condition that it shall not by
way of trade, or otherwise, be lent, re-sold, hired out, or otherwise
circulated without the publisher's prior consent in writing, in any
form of binding or cover other than that in which it is published and
without a similar condition, including this condition, being imposed
on the subsequent purchaser.

ISBN 978-37925-1-2
 iii iv

_____~ Dedication

To Almighty God
who gives knowledge,
wisdom and understanding.
g;y'.

::1ll::ed,
:..~ any
ceans,
~~ or

r.::: by

r; any
c EL'1d
:w:·sed
vi

____ ~ Contents ...

Preface , Xlll
The Revised Edition xiv
Acknowledgment. _ xv

CHAPTER 1: An Overview of Public Sector Accounting 1

Principles and Procedures of Public sector
(Government) Accounting
Nature of Government Entries
The Public Sector
Scope of Public Sector
Public Sector Accounting
Definition
Purpose of Public Sector Accounting
Basis of Government Accounting
Problems of Government Accounting in Nigeria
History of Government Accounting in Nigeria

CHAPTER 2: Legal Basis of Public Sector Accounting 20

Concepts of Public Sector Accounting
Legal Basis of Public Sector Accounting
The Constitution of the Federal Republic of Nigeria
Financial Regulations
Treasury and Finance Circulars and Circular Letters

CHAPTER 3: Comparison of Commercial and

Public Sector Accounting 30
Difficulty in Comparison

CHAPTER 4: Concepts of Funds 35

General Fund Accounting
Recording the Budget
Recording Actual Revenue
Financial Reports of the Fund
The Balance Sheet
Analysis and Changes in Fund Balance
Closing the General Fund
Encumbrances of a Prior Period
General Fixed Assets Group of Accounts
Recording of Assets Acquisition
Recording of Asset Disposal
Long Term Debt Group of Accounts
Provision of Fund
Retirement of Bonds
Debt Service Fund
Capital Projects Fund
 ;; ....
7L:.i
vii
CH..-\P'TER z; lEiq''''''llltl
Special Assessment Fund , -'-_,,,; _.~~~((~jiJiiW:· .,.j;

Differences between Cash for Construction and Cash for Debt Service -=-'.:-1 = ~WLw::l1;l!iim~~!'·

Enterprise or Proprietary Funds

Internal Service Fund (Formally Intra-government Service Fund) CH..-\PTER ::..2:: IllIgDIIlIIlIlI
Agency Fund lIiIrI;JHIBm'l
Trust Fund ='I~,l~::umum
Types of Trust Funds :t:J~!C~'UI~~$,::JIi

Nature of Government Revenue ~,a..~ Ol!i',JlliCt::J(:ll

- ~~. ­
_ :-_II.::::~~:-'!i. ',-,I:;lJrnn:
CHAPTER 5: Fiscal Federation and The Federation Account 99 =',?leT';;L.::llWDDUillli. 1\

The Concept of Fiscal Federation =::-'_ :c'Jte$ lIllIJl dlhm

Revenue Allocation Formulae up to Date =lle~S;i:..g::: (Cln al "i"
Financial Relationship with State and Local Governments .~__:belOlfJl~:aur.JIlI

The Federation Account l.\_.:~r:a..:ClllOllmUB· :lml

Distribution of Federation Account
Allocation of Revenue CH..U"n3. D: ~
Rapid Change in Revenue Allocation Formulae T.u"y!IIf!:$ ,wf JlIIIl:Jl::::::
ilIill::IilIDlUlWllllll&D!ll1n ' ',11
CHAPTER 6:, Sources of Government Funds 112 ~IIDDnMilllulII
Nature of Government Revenue ifiilll!l'JllDDlll
Sources of Government Revenue
Details of Revenue Heads cHAP'T'ICR 14:: ­
C~ . .
CHAPTER 7: Accounting for Government Funds '" '" 117 Rf'\lI~ICwlill
Objective of Fund Accounting lYIP"e::$·'lllfl!lmm]jnl
Consolidated Revenue Fund
Sources of Revenue
Development Fund Revenue Sources
cHAPTER IS:
~DlIl1It1
""!II
s..eC~·Ik::1
CHAPTER 8: Authorisation of Expenditure from Government Funds 149 =-11f:llll11!1all[ liCllhlllll
Recurrent Expenditure ]R:1LIIilliJmJi:11IIlfiIlIL'1llI
Capital Expenditure 1P1i:1I~aBIIlIJIlIt:
~"iCwJIi
·.-,.::JI~ :Ilmm
CHAPTER 9: Financial Responsibilities of Government Officers 163 3,;1 '::a!!IlIJl!'111I!1J11 ,,,IWT
Financial Responsibilities of Government Officer s, :.~ iIlmllIJHum,w
Accountant-Generals DJlfldilJilJm:lllullflj.
Details of Functions ~'IDI!IfIC
Auditor-General for the Federation ~11IIli11'C
Accounting Officers ::-Jb,e,lqjIIIIUf' StIUUIII
Sub-Accounting Officers
Federal Pay Officer cHA.P'T'ER l.*: a.mI!IIl
Revenue Collectors
Imprest Holder CHAP'1"E1l 1l7: . . .
Officer Controlling Expenditure -:-'!!"''l!!mJJ!WM!IlDmrnm

CHAPTER 10: Principles and Practice of Government Budgeting 176 CHAPTER Ut:~
Constitutional Provision Stqatimn !Il''!''!
Purpose of Government Budgeting JI~!IE;m
Budgeting System =e~1
Advantages of Line-item Budgeting 3.c:...k .UlJIWJI
:3 :.3.:e r:lf llnmm
 viii
vii
CHAPTER 11: Expenditure ControL 190
The Legislature
The Minister of State for Budget and Planning

CHAPTER 12: Expenditure and Classification and Control of the

Departmental Vote Expenditure Analysis Book 195
Definition
Objectives of Keeping a Vote Book
Basis of Accounting Used for Vote Accounting
Officers Controlling Expenditure
" __ 99 Operational Modalities of DVEA Book
Entries in the Vote Book
Design of a Vote Book
Authenticating the Vote Book
Alterations in the Vote Book

CHAPTER 13: Accounting Units in Government Accounting 208

Types of Accounting Units
Accountant-in-Charge (Duties)
................ 112 Retention documents
Payment

CHAPTER 14: Government Accounting Record and Books of Account..... 218

Cash Book
,"'._ 117 Revenue Collectors Cash Book
Types of Imprest

CHAPTER 15: The Treasury Cash Book 233

General Duties of Pay Office
Security Arrangement in the Pay Office
......... 149 Internal Check Systems for Pay Office
Ruling of Treasury Cash Book
Posting and Balancing of Treasury Cash Book of Payments
Multiple Cash Book Arrangement
Voucher Numbers in the Cash Books
...."._ 163 Balancing and Checking of Cash Books
Cash Balance Statement
Deductions on Payment Vouchers
Drawing of Cash from Bank
Deposit of Cash to Bank
Cheque Summary Register

CHAPTER 16: Bank Reconciliation 248'

CHAPTER 17: Government Transactions Arrangement 255

Transactions Arrangement

....... 176 CHAPTER 18: Preparation of Monthly Transcripts 260

Steps in Preparing Transcripts
Detailed Explanation of Steps
Certificate of Cash and Bank
Bank Reconciliation Statement
State of Internal Bank Adjustment Entries
 ix
x
Breakdown of Expenditure
Vouchers to Accompany Transcript CHAPTER 24 ~IUltI~,m;::',.,
Positing the Main Ledger
Incorporation of Transactions from other IIEn:stries, the CHAPTER 25 ~""
Treasury and Federal Pay Offices == ~ , '7:.-:-:..=It~~':'::l
Acceptance of Charges by Expenditure Section and Subsidiary Section .'. : :"~. L :::T.\~~ll::\'
Storage of Vouchers ~ ~~-. ~.:~ ;:JiiL :ii ...\:::11
Regular Contact with the Treasury ? :::": :-~:...D.g, ;;;;~~~:II
-=-~~:=._,:: _~"I ":"I'.":::'i
CHAPTER 19: Preparation ofVouchers 274 ._- ::::-::-•.1- i1\ .... Il:::inl
Definition
Payment Vouchers CHAPTER 26; ~1Il1l1:l1
Rules that must be observed when Preparing Payment Vouchers -:- -:-:-::'::"'3..L ':"~~'ll,I.r!~~~:;

Attachments to Vouchers
Checking and Passing of Payment Vouchers CHAPTER 2''7 .-,1IlJi!
Payment Voucher Register :: : " ~T:"ill::lllelrr:ll~' "
Lost Payment Vouchers -:-:-':;':....Diii: ' 'r.::::''::1II
Receipt Voucher ,'-,;: p'r':'PJ!t"illau:::IIG11111
Adjustment Voucher ., ::-....:·"J~~=-$ar~:t!l,
Transactions Involving Adjustment Vouchers ~iJ~~~:~L.iJJ:anr :.~Il::~::::::11

CHAPTER 20: The Organisational Structure of the Federal Treasury CH..'U"11IIZ _:. :8IImIIamm
Department..... 283 Fimmdl' ~' Sill;
Definition
Organisational Arrangement CHAPT'EJil~' JIammm
Provision of Financial Regulations PlIIIIIIiim:;
Civil Service Reform Provision =oe~"IJlI1;'
Organisational Structure of the Treasury : '::;'jI~ICo.u.le$ Itllll j

,"='C:~'lW1l1111ll1tll1l~ 'itOl
CHAPTER 21: Treasury Inspectorate 293 ~'''':1,5;Jl~1I1Il ,am_:
Inspection s.'':?'1?~:'
Investigation Section M.:lilli:tiiillll':!i',,'/I'lJllU:uw:·
Board of Survey and Enquiry :JJ1e:llIIlI!nl '1II:iialaamwu1l1
Losses
CHAPTER 30:: . . .
CHAPTER 22: Treasury Final Accounts 299 5oC'='~'1II
Functional Areas in the Treasury Final Accounts ~e'1l1'IItnlll1'll!:
Sources of Data
The Transcripts Unit APPEJ[DIXl
States of Accounts Unit QuestiDaS .... am-
The Crown Agents Unit
The Input/Output Unit
The Final Accounts Unit
The Subsidiary Accounts Unit
APPENIJ'IX Z
State at .. " un .11
The Reconciliation Unit
Selecteli.' UMIi IB,'

CHAPTER 23: Published Accounts and Financial Statement of the

Index, ." - _ - .._ .
Federation....................................................................... 307
Modes of Publication of Final Accounts
Monthly Statements
Explanations of Federal Government
Published Account and Finance Statement
 x

CHAPTER 24: Questions and Answers on Annual Reports 315

CHAPTER 25: Internal Auditing in Government Accounting 344

Government Internal Audit Policy
II,'
Appointment of Internal Auditor
Principal Functions of Internal Auditing
Reporting Relationship with Accounting Officer
Treasury Department Internal Audit Division
,274 Internal Audit Programme

CHAPTER 26: Project and Investment Appraisal in the Public Sector...... 349
General Investment Appra isal Technique

CHAPTER 27: Miscellaneous Government Account 355

Government 'Trading Accounts
Trading Accounts Content and Form
Appropriation Accounts
Universities, Polytechnics, Colleges of Education, etc,
Peculiar Accounting Practices and Policies

CHAPTER 28: Sources and Application of Funds/Cash Flow Statements... 378

Fund Flow Statements

CHAPTER 29: Accounting for Pension/Gratuity in the

Public/Private Sector 403
Definition of Pension
Objectives of Pension Plans
Accounting Methods for Pensions
293 Pension Plan Fundamentals
Supplements: The Public Sector
Military /War Service
Death Gratuity Tables

CHAPTER 30: Major Pronouncements on Government Accounting 413

299 Some Observations on Government Accounting in
The Third World Countries

APPENDIX 1
Questions and Answers 419

APPENDIX 2
State of Accounting Standard on Statement of Cash Flow SAS No 18....... .444

Selected References and Bibliography 465

307 Index 467

 xii
xi

~~- Preface
- I
Until recently, not much was written on the subject of
Government Accounting. Consequently, knowledge in this very area
was limited to few people who work in the finance and accounts o =-_:: 3 ::,ecia! Jfe::
department of Public Sector Organizations. Even at that there were Fe :-. C. .!.. C:::::Jl.J:!ll,tiilI:.ug,

no conceptual foundation for most of what they did resulting in lack tr.e ::-_'=': =-y aur:ndl. lPlJr:,
of interest in this area. -..::: : e:- ::--'::5. 'IIilUle ca
Impetus was given to more studies on this subject following the :3 :'''::- ~_,cpe I\:lIt:malIt I
introduction of Public Finance and Public Sector Accounting in the ~::-. : .i'led.ge of (mJ\IlIlllf $\
.1,nIJm:lI:mtm' ~
Institute of Chartered Accountants of Nigeria (lCAN) syllabus in
~OJ'\iI[ ~' wtutMl6im"'iH;
1993 and into the National Board of Technical Education (NBTE)
and National Universities Commission (NUC) syllabus. r-ea.deW"":s, :timmI ItIIIInte
As a result of the perceived relationship between Public Finance : I..:. 1.:5 rra1ll:Jilmms 8II1lIE­
and Public Sector Accounting, an attempt has been made in this tae ::r:c.iCh~iItDJ
work to bring these two closely related study areas into a single'
volume, hence the title Public Sector Accounting (Principles and
Practice). Ani Wilsoa
Most books written on this subject unfortunately, have either LawyerC. ~
been titled too theoretically or just questions oriented. This is an
attempt to link these, two key areas, namely the theory and practice
and specially.improve students performance both in internal and
professional examinations like (lCAN), ATS and Federal Treasury
School.
Undergraduates and post graduate students in Universities,
Polytechnics and Colleges of Education will find this book
invaluable in this quest for knowledge.
We shall gladly welcome constructive criticisms andj or
suggestions for improvement. Whatever errors or omission therefore
made are hereby acknowledged as ours. .
Thank you and happy reading.

Ani Wilson Uchenna

Lawyer C. Obara
 xi xii

____~ The Revised Edition

ilUib]ect of
_~'area

IIll!i a:o)"..m ts One special feature of this edition is the in-depth treatment of
t I1IIIlImcre we re Fund Accounting. We have tried to present a detailed treatment of
~Jii:c:ack the theory and practice of Fund Accounting. The solved examples
under this, were carefully chosen and they are indeed very useful. It
~gthe is our hope that this additional feature will greatly improve the
lIlIlIIiiiIqg in the knowledge of our students and other readers.
$1JI!!llIIal::.:ls in Another feature of the edition is the style of presentation. It is
tlllom f!\BTE) now more reader's friendly than before. The goal is to ensure that
reader's find the reading of this book very enjoyable. The
K FiiIm:na.."1ce illustrations are also very practical-oriented. This we hope will bring
11IllllDiIhr:in :his the much needed balance between theory and practice.
I1lIIlDII ill. single
~and
Ani Wilson
~ either Lawyer C. Obara
Th.i:s is an
nd practice
~1Juna and
'"' Treasury

:::Jlve:-s:ties,
::!h.is book

:,5 and Zor

c 'therefore

Oc:llen.na
ll'-ra
 xiii

_ _ _--'~ Acknowledgements

In writing this..book, we obviously owe a great debt to many

people who offered us guidance and assistance in one form or the
other. .
First, the materials in this book have been used to teach Public
Sector Accounting in Nigeria to several sets of undergraduate and
Post-graduate accounting students at the Rivers State University of
Science and Technology, Port Harcourt and the Institute of
Management and Technology, Enugu. In the process, the materials
have benefitted immensely from the comments and queries of past !IIlDm:BIJ
_ ,81IIIIIIII1 IIllnm
students in the departments of Accountancy .and Business
Education. We acknowledge this contribution. 0IIIIIIIIIJIl11lmllllllll\ret1
The immeasurable contributions of all our lecturers throughout 8qUU!i!iiDlIIInur
our university education is also acknowledged. These men and
~!i!\
women imparted on us, the knowledge of Accountancy in general
ItU:::MIIIIIIill,. [
and Public Sector Accoun ting in particular. They include, Chief (Dr.)
J.J.M. Braide, Chief E.O. Obele, N.A. Ukpai, Mrs. Grace Umoh, k~
Dr. U. C. Nzewi and Dr. Oyishi. ~..
We specially thank the following friends and colleagues: Messrs MiIml
B.D. Kiabel, L.A. Nwanyanwu, T.A Keme, Bassy Eyo. 0.1. Hamilton,
Shelly Attah, Henry Okoroma, Daka Ibinabo Ransome, Okorie ~
Onovo, Igbeka, V.C., Dim Oby, Odike, J.C. and serveral others for
ell! !mimOilil'ljillnltlt
tnJi' _ •
their encouragement and advice. Mr. Frank Eni and Staff of
Davidstones Publishers Limited, deserve commendation. fJilliiiilDldi ji.llle~
We arc grateful to the Institute of Chartered Accountants of ~II:.
Nigeria (lCAN), for..allowing us the use of their past examination
~
question. Finally, we must not lose sight of the immense
contribution of our wives, Mrs. Ani and Mrs. F.U. Obara, their was· a R1

warmth, patience and sacrifice have helped to bring this book J?! midjmticBtm
project to reality. Above all, we thank God Almighty who made this mrmglllijjiliiillil!ft

feat possible. ~
~

Ani Wilson
Lawyer C. Obara
 xiii

Chapter 1

. me.
",':l:l,~,"'('

"""""'''
An Overview of Public
:il;biLic Sector Accounting
anc
3:
it:""
e 0:
rials
i=Jast In a democracy, the elected members of the legislative branch
:ues.:s or arm have governing authority, which includes the power to levy
and collect taxes and borrow money. The Constitution of Federal'
Republic of Nigeria assigned to the legislature the control of the
..._"".
.\.. J . _
federal government's financial affairs, and stipulate that the
treasury could spend only money that had been appropriated by the
Ill)'!:, legislature or the Provisional Ruling Council in the case of military
regime.
Much of the development of public sector Accounting and
Reporting can be attributed to the authoritative work of the National
:\T!1e
~·c ~ Committee on Governmental Accounting (USA) hereinafter referred
,0: to as the Committee. This group has attempted to establish
principles within the parameters of varying statutes and enor.mous
political pressures. In 1968, the Committee produced the book,
Governmental Accounting, Auditing and Financial Reporting, which
was a revision and combination of two of the Committee's earlier
publications. This book is probably the single most frequently
mentioned reference on governmental accounting and is an
invaluable guide in this area of study.
Despite the work of the Committee, problem areas still exist in
 2 Public Sector Accounting

governmental accounting. In a statement before the Senate Banking 1:;llllll«e::9: ::'1

Sub-Committee on Securities, an American authority on February
24, 1976 described four areas in which accounting practices of ,1IDilt Ildl
governmental units are deficient. These areas are listed below:

1. Financial statements consolidating the funds of a governmen­

tal entity are generally not presented. However, consolidated
....
IwM:MlliltH

II"*..F*

~·u
date are appropriated and necessary because it is impossible
to portray the .overall financial health of the governmental
entity - the political community - through a review of
individual fund balances.
2. Accrual accounting is not followed in many cases.
3. Depreciable property and related depreciation are usually not
$

lIIIIImtiiimI
...
Jiiui/jillilli
JI!IIM"n

,ttl

-
IIIIIDDl
recorded. However, the recording of property and the related
. . . .1IIqII
depreciation is necessary to secure a full costing of the current
services received. It should be considered in the costs.
3 hE'!]
4. Recognised standards of accounting for Pension Costs are
,_,iiiie
frequently not followed. Furthermore, these plans frequently
are not adequately funded, are not based on appropriate --':IDII
...,row
actuarial assumptions, and are not accounted for in a proper l'~ ,

manner.

The accounting profession need to conduct research to establish

Public Sector Accounting principles which will produce useful
.,..1
""r' . . .

~~1't1
If".!

financial reports. When current public sector accounting reports are'

not understandable, elected officials cannot be totally blamed for
their failure to take actions that will promote sound fiscal policy. •. 1
':11" ,.

Principles and Procedures of Public Sector

(Governmental) Accounting
The fundamental purpose of accounting is the communication of
t financial information and current financial position and in the 'Co. D
I
planning of future actions. Therefore governmental and commercial
units adhere to the generally accepted accounting principles of
consistency, materiality, objectivity, and full disclosure, and both
 An Overview of Public Sector Accounting 3

.f." 3anking
uses Double Entry System.
. February The accounting and reporting procedures for a governmental
·a::.:ces of unit differ in some respects, from those of a commercial unit
because governmental and commercial units have different
purposes and operate in different environments. For example, while
:,c,'e:-:1men­
the primary purpose of a commercial unit is the maximization of
asoiidated
profit within the limits of socially acceptable action, the primary
rapossible
purpose of a governmental unit -is to provide services. Also, the
:'n::n ental
freedom of conduct of governmental units is more limited by legal
review of
requirements and regulations.
Although, Public Sector Accounting should be based on
principles and techniques that promotes economy and efficiency in
sually not
accounting for public funds, it must also demonstrate compliance
lilliE related
with applicable legal provisions. Any divergence between generally
~eC"urrent
accepted accounting principles and the law must be resolved in
::(l]l5lts are
favour of the legal provisions. For instance, if a legal regulation
requires that the activities of a unit be reported on a cash basis, the
r'eq.lently
propriate units must comply, even though the results may be incomplete or
a proper unreliable.

Nature of Governmental Entities:

~:$tablish A. Service: Governmental entities are established by the
I" useful citizenry, through the constitutional and charter processes.
;:mJlc1:s are: The primary objective of governmental entities is to render
,::11 -e':' fo r service to citizens.
B. Lack of Profit Motive: In most cases, governmental entities
do not seek to profit from the activities in which they engage.
This general absence of profit motive is the primary
distinguishing characteristics of governmental entities as
compared to commercial enterprises.
::: :he C. Dependence on Legislative authorities: Governmental
:::J.'er:ial entities generally receive their authority to act directly from
'·.:J't-es of the legislature, which ultimately oversees and circumscribes
,,::,:,th governmental operations. Although, the operation of
commercial sector enterprises is also overseen by the
4 Public Sector Accounting

legislature, this type of oversight is regulatory rather than'

proprietary in nature -..':-_=- ': ..:..? 7':::llt~
D. ',; 3.:.".: au:Jlldi bO I1
\WI
Responsibility to Citizens: In financial reporting matters,
governmental entities have the responsibility of
demonstrating .good stewardship over financial resources ScopeafPI
provided and entrusted to them by the citizenry. In contrast,
:-":1. ~ Pubk Se:~I::
:-':-.e F etdileIr,aW] G
commercial sector enterprises have a similar stewardship to
a5::T'.::~<es 1IEiIlk;ue 1
their senior and equity security owners.
'-- :-~-. e stiiEll!Je'ggID"
E. Taxes as a Source of Revenue: The principal source of ..:...~'""~:S.,
--~~-
revenue for governmental entities is taxes levied on the
::::te 1c:lIW P'lE'
citizenry. Commercial sector enterprises, on the other hand, ..: :31tE p,lUlti Jlillll1DlllilC
have not comparable source of revenue. t!IJJne.~:

1ID.~pIm
ICIlI1IlllII"_.... ·nn
Pa16:11eC
VarioUS~1
The Public Sector ::-.e s-c.bject of IIPhwlll
de:::::':: C r; S pmmrtttJr::i
It is awidely held opinion by financial experts that the public
..'.,.cco'.::". ~..l:"_~~
sector in Nigeria controls about 60% of the asset base of this'
1 ' "..'.,.? :-ocess • Jr'lf
country. This is likely to be so in most countries of the world moreso
of gOi.'e:TIJ!D!"lI!IIltlt,
in Socialist and Communist economies where the national
the '::-:oad !U:~I
government play overwhelming roles. In Nigeria today, there are few
concerned W
endeavours that the government does not playa vital role in some
trar.sac~. II
directly, many indirectly.
The =-e;::'~
The Public Sector can be defined as that sector ofthe economy
ma:.c:-.5 der:illSm[
established and operated by the government or, its agencies,
2, "A ?-:::;....~
distinguishable from the private sector, and organised on behalf of
gO\'er:1~iilI:J
the citizenry.
A un.cue btl
Three things stand out clearly in this definition:
ins trC:::l em:l\U,
(a) Public Sector organisations are established and operated by
s raterr;enb.5l1
the government. This excludes the possibility of individual
class:'::<cal\tililmlJllml:
ownership. Hence they are not proprietary.
(b) Such organisations are distinguishable from the private sector
(c) They are run on behalf of the general public. The citizen decide

,I;
 .... 4* $ :a,:'3,4

An Overview of Public Sector Accounting 5

~ than'
through the democratic set up, ideally, what services they
lIatters, want and how it should be provided.
rr1ty of
liourees Scope of Public Sector
otrast, The Public Sector in Nigeria consist of:
~to (a) The Federal Government viz: its ministries, departments, and
agencies like NECON, FSP, PTF, etc.
of
Jmrr'1Ce (b) The state governments represented by its ministries and
In the departments.
hand, (c] The local governments
(d) The government parastatals partly or completely financed by
the government. Some government funded parastatals operate
in some private sector fashion, government presence coming
only in the form of control, directives and subventions.

Public Sector Accounting

Various authorities have tried to present working definitions of
the subject of Public Sector Accounting. Analyses of the varied
lIubtic definitions portray, the following nature of Public Sector
r Ithis. Accounting:
~nso 1. "A process of recording and reporting the financial transactions
oonal of government. Essentially, Public Sector Accounting is part of
E~' the broad Accounting spectrum. Like all Accounting, it is
concerned with collection and recording of financial
transactions, but those particularly affecting the government.
omy The reporting is to interested parties who will need them for
rses. making decisions for the good of all".
ufof 2. "A procedure involving the preparation of the accounts of
government in accordance with budgetary classifications."
A unique thing about Public Sector Accounting is that legal
f by instruments demand and delimit the forms the financial
t::Jlal statements should take. Many a time they follow budgetary
classifications.
6 Public Sector Accounting

Definition , '
Public Sector Accounting can be defined as the composite activity relatDdr alL
of collecting, analyzing, recording, summarizing, reporting and de pat IIGMfflii,llI""
interpreting the financial transactions of government units, In Gov~'

CARSRI. :nstn ."wt1 1i!ll!$,

i11

Est. . . . . . . .
Purpose of Public Sector Accounting
\a I The puiI:lIiIE ••
(a) To demonstrate the correctness and reasonableness of
\b, InlJ7eSUE,S.aml
transactions and their agreement with established rules. compaldliIlUtes,.
(b) To give evidence of accountability for the stewardship of ,c . ?1"ofessiidilldiililliB!lll!~
government resources.
Sf"'liMtnldllliil!ll$." rd
(c) To make available vital information for good control and
'd SubimDdJp
prudent management of government activities.
pardO .S!!@iIlClPI

~el, 'Oiawji(lll""
Nature ~1IIII1l:;
ll,m­

Public Sector Accounting by nature is closely linked to the budget ,fl F~.iiDIiImn
process. The Federal Government establishes several accounting' !ig; Wimrlld. ~
principles and requirements to be followed by the government Inlllem"1Mm@l!mlllfilifi
ministries and extra-ministeria departments through issuance of
Treasury circulars and the Revised Financial Regulations of 1976.
... , F~$

.
Interested Parties in Public Sector mea·nrlfiliidil.illIiII~
l~' m.iIII'1l
Accounting Information
The users of government or public sector accounting and (iij Gilrlrlmlll
financial reports fall into two broad categories: Internal and fiii1!' ~
;ivl ~
External users.

Internal Users include: Objectl a

(a) The Federal Government, State or Local Government as The U8S1D
distinct Units. could be SUI .illiI'

(b) Members ofexecutive and their advisers. I 1) Conb'1llli1 JDIIIIUI

(c) Officers in charge of departments, units of government. th...roucJI11llJ
(d) Officers in charge of control functions. ini'onm1l!iM!l,!jjirM"I" .
(e) Department, agencies, organisational units conducting 121 ptan~,]Ill
:o~:1IlD
?Oiicies.
 An Oueruieio ofPublic Sector Accounting 7

Kti'\ity relatively autonomous operations under ministries and

:ug and departments.
units, (f) Government corporations, parastatals operating as
instruments of governmen t.

External Users Include:

(a) The public at large and in particular concerned citizens.
If:SS of
(b) Investors and creditors: banks, investment houses, insurance
boo
companies.
IlfiIDiip 0 f
(c) Professionals and other analysts: accountants political
scientists, economists, lawyers, researchers, etc.
• and
(d) Sectional groups i.e. Political parties, labour unions and other
pressure groups.
(e) Oversight bodies i.e. regulatory authorities e.g. Central Bank
of Nigeria, Nigerian Deposit Insurance Corporation, etc.
Imm1iget
(f) Foreign interests, exporters to Nigeria and finance groups.
IilllIIlU1ting (g) World bodies such as the United Nations, World Bank,
I!IIJIIIIIIIleIt International Monetary Fund.
~ of
~"16.
Financial statements m general can be regarded as
meaningful if they are:
(i) Easily understandable.
I; and (ii) Give full report or coverage
I and
(iii) Supply benchmarks for performance evaluation.
(iv) Readily available and are useful for the purposes sought.

Objectives of Government Accounting System.

I:Illtas The uses to which Public Sector Accounting data can be put
could be summarized as follows:
(1) Control purposes, to ensure efficient financial administration
through system of internal control and management
information.
\Ictmg (2) Planning purposes, to provide historical bases for models,
forecasts, budget plans as a guide to the formulation of
policies.
8 Public Sector Accountin'g

(3) Accountability purposes, to provide a system of financial

accountability which will promote proper stewardship of ::::1 ':Jllf:$", ::ilU

assets, deter wastes, dishonesty and extravagance and a~

(4)
promote effectiveness at reasonable costs.
Appraisal purpose, to provide outsiders with financial data
that will help them to reach informed decisions.
~'

,. .... Itiiill!

Concept and Principles ofGovernment Accounts 2. .6

Concepts have been defined as broad based assumptions
underlying the preparation offinancial statements of an enterprise.
Public Sector Accounting is an integral but separate branch of
accounting, sharing in common many concepts and principles
3

4.
5,
-
lllItp

~JIIIIl
I!IIt
1tmmIm
,ill

applicable 'to the private sector e.g. Consistency, materiality,

6" bl
periodicity, monetary, double entry r duality, costs and objectivity: 1". IItp
concepts.
D­ I.
Basis of Government Accounting
There are three different basis on which financial accounts can
be compiled. They are:
(1) The cash basis
, ••

(2) An Accrual basis and

J

(3) A commitment or obligation basis.

ll..

-
Itlll:l

(I~II
(Iilll

'I/iillli
I~!I!
1~li
The Cash Basis 1II'll!mm!
This basis is very easy to understand. It is the basis of accounting K!ICIIl'iIDIIIIlt
under which revenue are recorded only when cash is received, and jl, III"'ii!!&ltI\h;:'~

expenditures recorded only when cash is paid, irrespective of the

accounting period in which the service was rendered or the benefit 2" 1t1
received. This is the basis upon which the preparation of 1IIlll!I1I

government accounts in most countries including Nigeria lies. One 3" Ilt~

of the reasons for the government to choose this basis is its aIlIIIl
simplicity. For example, laymen find accounting a difficult subject 4, Iti
but in government many laymen e.g. ~ost masters and police,
superintendents, are called upon to perform some accounting

,,;jilIL
 An Overview of Public Sector Accounting 9

='".lties, or at least to supervise bookkeeping work. Such people need

a simple method which can be learnt quickly and performed with a
measure ofconfidence. The cash basis provides these.

Advantages
1. It is simple to understand.
2. It eliminate debtors and creditors.
3. It permits easy identification ofthose who authorized payment
Ins
and received revenue.
:{~ ...
4. It is factual.
:of
::J. It allows for comparison between amount provided III the
budget and those actually spent.
6. It saves time.
7. It permits delegation of work in certain circumstances.

Disadvantages
1. It takes unrealistic view of financial transactions e.g. there are
five stages through which a spending transaction passes.
(i) Management decision to spend money.
(ii) Issue of order or contract for the supply of goods or
services.
(iii) Supply of goods or services acknowledgment ofliability.
(iv) Settlement ofliability.
(v) Consumption of value.
The cash basis of accounting only records stage (iv) while the
accrual basis records stages (iii), (iv) and (v) while commitment basis
::ud:. records stages (ii) to (v).

2. It makes no allowance for depreciation because assets are

written offin the year of purchase.
3. It does not reveal an accurate picture of the state of financial
:::s affairs at the end of the period.
4. It is oflittle use in making decisions on economic costs.
 10 Public Sector Accounting

Accrual Basis facilitaJllr iiIIllJII:

furnish_a

'I'.
.....
..

1!J.
Under this basis, revenues are recorded when earned and
expenditure are recorded as the result in liabilities are known or
when benefits are received notwithstanding the fact that the receipt'
or payment of cash could take place wholly or partly in another
Id I

(e I
.~ ccoi J'II1I!lI!DmC$1
permit~
pro~'1IllllI
Th e ac:;aIII!DJl\tl
period.
This is the basis commonly found in the private sector and all disclose 11k' .~
governrnent parastatals e.g. NEPA, AIRWAYS, NITEL, NIPOSTetc. o?era~"
This approach permits a factual recording and matching of all iden tnN MimjMmDIDll
revenue against the corresponding expenditure. results ~­
:ts ptr.,iilIiidiIIIIIIl
Commitment Basis I:; ,J\ccV!"""'" 'lIlj

This is a basis that records an anticipated expenditure .amr:iiidI iIlllliIm

evidenced by a contract or by a purchase order or determined by pili.'M z: e~l'
administration. In government finance, budgetary and accounting pbysiall"imi
systems are closely related to this basis. This is used in the f, gj The.,' IiM"i!!iftrt;
Department Vote Book for expenditure control. provide ­
reclassi,r-i !4"iiIiDlDIi
developiiWlld!tmlII
Accounting Systems In Government: This eo..·."nia
The Standard Required. goverIlJ]!lallill ,iii
The Essential purposes of government accounting have been recordtug., IIIIIIl:I
clearly identified in a United Nations manual, as follows: effectree ...-rn
(a) "Accounting systems have to be designed to comply with the, account~
constitutional, statutory and other legal requirements of the provisions !8IIl
country". plannin.g. as
(b) Accounting systems must be related to the budget
comparisl:lDlli".a
classifications. The budgetary and accounting functions are
complementary elements of financial management and must
Problems ole..
be closely integrated. The accounts must be maintained in a
(1) General I;MS II
manner that will clearly identify the objects and purposes for
accountioll -,
which funds have been received and expended and the
specific ~
executive authorities who are responsible for custody and use
memhers fIJI
offunds in programme executive;
admirJ,sU-.mI
(c) Accounting systems must be maintained in a way that will

.."."ill!i;.
 AnOveruiewofPubi.' . .r Aco ·,n9 11

facilitate audit by external review author-ties, and readily

~ed and furnish the information needed for c'!ective ~l udit;
~. ilim.own or (d) Accounting systems must be c!,"cloped in a man: icr that will
: the receipt permit effective administrative cuntrol offunds and u!Jlrations,
. im:m. another programme management and internal audit appraisal;
(e) The accounts should be developed so that they crfectively
ldI!I:IF and all disclose the economic and financial results of program me
\DiIOSl' etc. operations, including the measurement of rev er-lU e .
lllidlming of all identification of costs and determination of the operating
results (the surplus or deficit position) of the government and
its programmes and organisations;
(1) Accounting systems should be capable of serving the basic
~iture financial information needs of development planning and
~ed by programming, and the review and appraisal of performance in
WllCOI:lQIl ting physical and financial terms;
III!fi in the (g) The accounts should be maintained in a manner that will
provide financial data useful for economic analysis and
reclassification of governmental transactions, and assist in
development of national accounts.
This enumeration gives a good picture of the purpose of
government accounting and of the necessity for proper
bJJarft been
recording, measurement and data processing systems for
effective co-ordination with other branches of accounting,
t Wlith the
accountability purposes (e.g., Compliance with legal
!d:s of the
provisions and budgetary commitments), managerial and
budget planning aspects and domestic and international
~.are
comparisons, analyses, evaluations and measurements.
_ must
IIIIJal in a Problems of Government Accounting in Nigeria
IDDeS for
(1) General lack of understanding of the purposes of government
antmIIIIII. the
accounting ­ among the society in general, and the following
;mIIIIIIi use
specific groups in particular - politicians (i.e. Including
members of the legislature and the executive arm), the
::~Jiiilllt v.ill administrators, and sadly enough, a substantial proportion of

•
12 Public Sector Accounting

C:m:::li:::;
the accounting personnel in government.
_IIlJII:..1

(a) The society in general: Wrong notion of the wealth of ~'1\'

government which, contrary to reality, is usually regarded as 1d"1JlllW

limitless; a national cake from which any individual in position iIIIIintmnwIJ
could cut his/her share at will and get away with it; hence very :laummuful
scant and weak public or societal reaction against the excesses'
of public officers which frequently include deliberate t!Im:l)1 ..'
,nmmll:t~
misallocation and misappropriation of funds, fraud,
embezzlement, waste conversion, etc., public opinion through pn1lUll
that press against these serious shortcomings not articulate _oamnll

.•.
_:::IIlU
and purposeful though e.g. press have not seen the need to
:i.1I1llDlWi
advocate the strengthening of the control powers of the
Treasury. Not a single editorial has been written by any of the .Jf1'",fj
dailies in support of the aspirations of the conference of ,.,

­
~
Accountants-General to instill discipline in government
~i
administration, nor has the television or Radio stations
mounted any programme aimed at this objective - all of which
sum up society's attitudes, feelings, and or lack of .-nm
understanding of one important basic purpose of government ~I

accounting which is to ensure that public functio~aries fIPi

entrusted with government funds account for every kobo
.....
.-maw

...
thereof. Society itself is averse to probes and has scarcely
benefitted from the results of several probes undertaken in the ~

past. ~

(b) The Legislators: Discuss the behaviour of this group in the'

society since the inception of the now defunct presidential 1.11~
system; they see their role in a different context from that of the ~
,~
electorate that elected them, same national cake idea; the
legislator does...not see himself as the beginning and the end of "W-­
accountability, that is, the beginning through budgetary
,e­
_:tt
approval (legislative appropriations), and the end - to whom
public officers are accountable for those appropriations. Hence IiiiI!l\l
 An Overview ofPublic Sector Accounting 13

cannot conceive a notion of duty which requires him to bring

about legislation's aimed at improving the effectiveness of
lWI'ealth of government accounting without which a satisfactory standard
pmrded as of public accountability cannot be achieved. Above all, duty to
~ position show example of prudence and economic use of government
IlflIIIiIIII:every funds is terribly lacking.
: ,ICIlI::eSS es
ildiiiberate (c) The executive and the administrators - Same national cake
~" Jraud, concept is seen even in a more pronounced degree in this
DLlIIllIInnrough group; appointment to positions of ministers, commissioners
ilID'1II:iculate or administrative heads of departments (accounting officers)
~1IIIIleed to are seen not as a call to service but as the arrival of their 'turn'
s of the to cut their personal share of the cake; accounting officers do
mmmy of the not see themselves as such but as spending authorities only,
~of the accounting aspect (not the recording of transactions but
lalDIII!IInent accountability for expenditure) is frequently forgotten and the
slations attitude goes down the hierarchy, from the senior
'dwhich management, engineers, architects, etc. who would sign
iliaIck of certificates for work not done, and purchasing officers who
ranment would collude with suppliers to inflate prices. Financial
n::rim:mari es regulations are seen as unnecessary red-tape, and,
~ kobo accountants regarded as stumbling blocks, hence top
R:a.n:ely administrators would not support any move to improve the
a:n. m the efficiency and effectiveness of the accounting function in
government. They have, in fact, blocked attempts by the
Treasury to achieve any success in this direction.
tp m the'
$lidential (d) The accounting personnel:- Majority of this group do not
.ofthe possess adequate accounting education and lack proper
b.; the understanding of the role of accounting function in
Jr cnd of government. As a result, they cannot take desirable impact on
~. the activities of their organisation. They see themselves most of
lDI' whom the time as pay functionaires and book-keepers. Even at the
R" Hence high level of chief accountant, he does not see himself as
14 Public Sector Accounting
1"_.1,,

Controller.

(ii) Inherent weakness in the existing organisation I

administrative arrangements for government accounting
function:

(a) Discussion technical inefficiencies and ineffectiveness

inherent in the location of the Treasury - the anomaly of
putting chief accounting officer of government under one ;;
:DI
of the administrative (accounting) officers; deliberate
attempt within departments to relegate accountants to' I1t

second position in departmental financial administration.

••
(b) Lack of co-ordination between budgeting and accounting,
which are complimentary functions; non-use of
government accountants for budgetary function by the
Budget Department;
Ill' . . . . .
~
PI_. .. I• Df

(c) Because of the general attitudes depicted in (I) above,

reluctance of administrators to involve government
accountants in the decision-making process;

(d) Difficulty of pushing through proposals for improvements

1M: ;!I"
•
Q

_1IIIm
. . _pn
r
Mil:

­
,)fin

.......
in financial administration at both national, state and
departmental levels. 1IIl;;lII\I1I"
\~r MIlM

(ii) Technical issues

(",.~
......,
(e) Accounting principles adopted for government
accounting; discuss the basic weakness of cash
accounting basis; need to supplement with accrual basis
where appropriate so tha(government accounting can be,
IS". ' ,

transformed into. a more. analytic decision-making tool $§Ji i

such as accounting is in the private sector. .a

11!;i':i,'iF(:

i\\ ~ ,Ii',
~ j :,\" i,\;1'\'\
':,1,\\,\""""
,'I', ";,,\ (
:1,:,',:\\ \'
't ' I
 An Overview of Public Sector Accounting 15

(h) Shortage of qualified accounting staff - due to lack of

training facilities within and outside government,
Treasury took the initiative a few years back to establish
a school, still far from fully developed; lack of trainers
and training materials; no next books available on
government accounting; Treasury not yet able to issue
authoritative accounting manual; ICAN, ICPAN, and
mas ANAN not yet alive to its responsibility to commission a
iB90C research on government accounting in Nigeria and
publish texts which can be used for training and

...
:nr,~

IIU3Ik reference; failure to apply computerization effectively to

• 10 the accounting system .

Suggestions for Improvement

aII!IiiIIm&
t of Ii} Need to educate the society at large on public accountability.
11' 1!IrJe The mass media and Treasury could co-operate to formulate a
programme for this purpose.

~. (ii) Seminars of the type held at ASCON some time ago on "Cost
IlllIlen t Consciousness", should be arranged and conducted at various
levels, beginning with the legislators, after their inauguration,
and administrators together, and down the ladder across the
m.ts spectrum of public service.
ar:ld
(iii) Treasuries all over the country to be strengthened by relocation,
internal re-organisation and legislation:

lent [iv] With regard to (iii), appropriate legislation should be introduced

uh to redefine the duties and powers of Accountants-General and
IIltRS the responsibilities of the Treasuries. The introduction of
i ee comprehensive internal audit in all departments should be
1lO0[ covered by law; otherwise accounting officers will not accept
the idea to practice it. The accountant-general should be
16 Public Sector Accounting

required by law to report significant internal audit observations ::a"c::re"lMi" ::

to the Appropriation and Finance Committee of the National ~liiilIIlllrnliE:[
Assembly either half-yearly or annually. ~:5 Wma:lIm
~~II!f'~
(v) Training programme for accounting staff to be expanded and a
c:Jlal:M; IIDlIIi 100
professional certification in government accounting iiIlCiClI;lm!!J!mmIllt;;!!Iwm
introduced. Conference of Accountant's-General to be called
prin;nrOiPlr .~
upon to implement a decision taken on this issue many years
,a~Ife'1l:I
ago.
b&tf: IICaDIIIQIl1t I~
lilImmm :lllBedBll1
(vi) Granted that (iii) and (iv) are realized the office of Accountant­
General to explore areas of government administration which
11~11 G m -t1I!lilldDII'rrenml
had hitherto not benefitted from internal audit appraisals e.g.
• IllIBIIimuIHl
Foreign Exchange Department of the Federal Ministry of
t~'iiUi'I,1
Finance,. Company Affairs Division of the Ministry of - ,... , ")111'- "

. . .",- .II'EU
Commerce, assessment of Customs and Excise duties etc. and
rrMIt,-i iltll li II
have them placed within the jurisdiction of expanded internal
lJ!mIm:i~ •
audit service. Cw",&rrnlimilmf Htt II
CBS,
(vii) The Treasury should initiate the compilation of price list of
common office items e.g. Toilet rolls, office stationery etc. for
"'++1*,1'-;'
circulation and use in all ministries/departments. This' will
lGi'M,,"M'FMliillli
obviate the practice of engaging contractors to supply such. It
.l1iJlICIIIIIlIllf!lwa!!llWmm
should be updated periodically. Calling a tender board-meeting
for small values slightly over N5,OOO could be eliminated if such
_ ~. -"iill'"'' ICmJ
[1!eP!lJidmnMlliW!ljm
price list is available.

(viii) The Treasury should commission a writer (expert) or an author

d:e:a:!~
or a study group to write a standard and comprehensive *mM"i~JpN
Iljlmtu«:!ii ·i.i"~~,,,~
accounting manual for the Treasury.
"IIIIIIIIIt.lII\!II!III!Il,.mD
(ix) The Treasury should put an end, as quickly as possible, to
the practice of running two different promotion policies in .1 ""iii"".,.
Wile;;!!
mmIEe~tIIiIl_ilD\1I1

Tm!nae' pnIftlkmrIl d
parallel for the executive class crossing to the accountant's
,.' . ~' .-"IPem!!!

ii'!~111111 IIii'
~',
!,
,I',
1111
~ 1 ill
l! .
I"
I

lj'ln r;:
(' (i
 An Overview of Public Sector Accounting 17

i(Jlllml$1lu,Tations cadre. While some were made to cross on the basis of

tIi:ne. Na:ional established department's prescriptions. No conscious effort
has been made to phase out this policy or to find a more
equitable basis for this class of officers to cross. It is from this,
~anda class of officers one finds an ACA holder aspiring to chief
8DCOunting accountant who cannot explain whether the double-entry
li.1 be caned principle applies in government accounting, or confronted with
1le'lIIIIIIlIBPY years a Statement of Assets and Liabilities published in the Gazette
he cannot explain a single item, and yet will have conferred on
him the status of a chief accountant.
lf~"1:ant­
liMllliilil!1i II which (x) . Government to be called upon to re-examine and implement
~sa:s e.g. the various recommendations submitted to it in 1979 by a
il 'Uinistry of delegation sent to the US to study accounting functions in the
MInistry of presidential set-up. A seminar which examined the report of the
~etc,and delegation also made recommendations. None of these have
llI!IIIIIIIlaiI ir.temal been given any considerations. The recommendations of the
Conference of Accountants-General have always 'fallen on deaf
ears.
~( ,.nee
list of
~. etc. for
History of Government Accounting in Nigeria
~mIts. This' will
Government Accounting in Nigeria can be traced to the Native
;n~' such. It
Revenue Proclamation No.2 of 1906 which was the first step taken
lMaIrd-meeting
by the British Colonial Government to introduce a comprehensive.
~tedifsuch
legislation and direct taxation in the colony.
It applied only to Northern Nigeria and empowered that resident
of each province with the approval of government to fix and assess
-r:;1 <Dr an author
the tribute payable by the people. These taxes were kurdin sarauta
::::::lmprehensive
accession duty), gasua (homage to elders) andjangali (cattle tax).
The 1914 amalgamation gave Nigeria one consolidated revenue.
Thereafter, the government regularly faced the problem of how best
possible, to
all$.
:0 use this revenue for the benefit of the people all over the country.
:fum policies in
The problem of revenue allocation in Nigeria's administrative
:e accountant's
history predated the federation. The amalgamation gave Nigeria
JI'.
"1 18
,'. j
Public Sector Accountmg

common railway, telegraphs, customs and excises, a supreme

court, a standard time, a common currency and common civil
service.
PnIII
In preparation for the introduction of direct taxation in the
South, partly to provide government with more revenue and partly to 'l: Tllmrr' llhmll!i\lM"_ S
provide fund for the native administration, the 1906 proclamation II!lmIlIIIIml!Iwt=.IIl:iIIcm
was enacted with modification as a Nigerian Ordinance titled Native !by trlle IiiiJmmtQtll

.
ldtnai!ntaeltIHilliiiHlBt1tll(
Revenue (Proclamation Ordinance No.1) 191 7, Public revenue rose
from £1,000,000 in 1906 to £2,668,000 in 1913 as a result of
increased direct taxes and more custom duties. --
1!tI"
It was not until 1st April 1957 that the Audit Ordinance No.38,
lp'!E1il!illlidiblldflllUtt ,lB
1956 came into force to provide for the appointment, salary, tenure
DL.. ~1lIlJWI1[
of office and duties and powers of the Director of Federal Audit (as he 2. ""NIlII!I)J
was then known) and for the audit of public accounts for the, ]l.. ~
federation and for other purposes incidental thereto and connected ,41", _"M"MiIlift!
therewith. Another ordinance titled Finance (control and 5... ~ta
management) Ordinance No.33, 1958 came into operation onJuly ... 'JII'1Immmmm&;
31, 1958 to provide for federation and for matters connected
therewith.
2. '1IIiIr - ' Ii
~1iIIIIiiint::-.nni
IMI ......
1IMBiIIIl' II
~

Practice Questions '(fiilll "'ihUiiiiii

• •1 iiiid

l. Compare and contract Cash Basis of Accounting System, with

Accrual Basis ofAccounting.
• in . . . .;;
~Imii
2. What do you understand by Accrual basis of accounting? What
is its advantages and disadvantages?
3. State the users of Public Sector Accounting and to what use
could government accounting information be put?
4. What are the distinguishable factors in cash basis, accrual
basis and, commitment basis of accountings?
~ :.

1 1 \1
i!J
1"1\.1
. 'f!im
/
I:

",Hh.
 An Overview ofPublic Sector Accounting 19

;." a. supreme
I:Jl::lJI1lDm 0 n civil
Professional Examination Question
DlIion in the
~,mmd partly to 1. The format and content of Public Sector Accounting differ in
JHIIIIDI1IIl'da8.ti 0 n many respects from that of commercial outfits; This is informed
~:UiIIIIiai Native by te fundamental difference in their aims, economic
:maaIue rose characteristics, institutions and accountability.
a result of
lIE

ijmwre No.38, Required: In the light of the above, you are expected to compare
1IIIIIIIEry, tenure government and business outfits under the following headings:
IIiJLAudit (as he 1. The overall goal of each
2. Economic goal
lmmts for the
3. The target of their products
IIlIIIIiconnected 4. Sources of their revenue
~trol and
5. Cost control
adiDn o~.July 6. Forms of Entity
rs connected

2. The overall goal of accounting and financial reporting in the

Public Sector is to provide:
(i) Financial information useful for making political and
social decisions and demonstrating accountability and
stewardship.
(ii) Information useful for evaluating managerial and
organisation performance.
s,-stem, with
Required: What are the basic objectives of accounting and financial
JIDting? What reporting of government units.

11m' what use

1IlSis, accrual

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