Course Code: 5104

Course Title:Accounting for Govt. And Non Profit Organization

Course Teacher: Prof. Dr. Mizanoor Rahman

Prepared by: Md. Faisal Sarwer (MBA)( 21-22)

Chapter : ALL (1-9)

SET-1
1. What is meant by government accounting?
2. What are the objectives of government accounting?
3. Distinguish between government accounting and commercial accounting.
4. State the nature of govt. entities.

Answer : S11

The accounting system used in government offices to record and report their financial transactions is
known as government accounting

It is the systematic process of collecting, recording classifying, summarizing and interpreting the financial
transactions relating to the revenues and expenditures of government offices.

Answer: S12

Accounting is very important in a democracy where people have a right to know how government
finances are being managed by their representatives. The objectives are as follows:(Describe in Own
Words)

 Information about Revenue

 Information about Expenditure
 Information about Loans and Deposits
 Information about Cash availability.

Answer: S13

Following are the main differences between government accounting and commercial accounting:

Basis Govt. Accounting Commercial Accounting

Meaning The accounting system maintained by
the government offices is known as
government Accounting
Objective Government accounting is maintained
by the govt. offices to know the
position of public fund.
The accounting system maintained by
business organizations is known as
commercial accounting.
Commercial accounting is maintained by
business organizations to know the profit or
loss and the financial position of the business

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Budget Government accounting strictly Commercial Accounting does not follow the
follows the government budgeting government budgeting system.
system.
Basis Government accounting is prepared Commercial accounting is prepared on cash
on cash basis . as well as accrual basis.
Level of Government accounting has the Commercial accounting has no provision of
Accounting system of central level and operating central level and operating level accounting
level accounting
Rules and Government accounting is strictly Commercial accounting is maintained by
Provisions maintained by following the financial following the rules and principles of GAAP
rules and provisions of government .
Information Government accounting provides Commercial accounting provides information
information to the government about to the concerned parties about the operating
the receipts, transfer and deposition of result and financial position of the business
public funds.
Auditing An Auditor General Office audits the Professional auditor can audit the books of
book of accounts kept under accounts kept under commercial accounting
government accounting

Answer: S14

Nature of Governmental Entities

1. Collect resources and make expenditures to fulfill societal needs

2. Absence of profit motive except for some activities
3. Have legal authorization for their existence, conduct revenue-raising through the power
4. of taxation, and have mandated expenditures they must make to provide their services
5. Control mechanism - Use of comprehensive budgetary accounting
6. Accountability for the flow of financial resources is a chief objective
7. Typically are required to establish separate funds to carry out various missions, each fund
8. is an independent accounting and fiscal entity
9. Many fund entities do not record fixed assets or long-term debt in their funds
10. An important objective of governmental financial reporting is accountability

SET-2

1. Define non-profit organization. What are the characteristics of non-profit organization?

2. Compare the main financial statements of a non-profit organization with profit
organization
3. Differentiate between non-profit organizations with profit organization.
4. Explain how general purpose govt. differ from special purpose govt, with few example of
each type of govt.

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Answer: S21

A Not-for-Profit Organization is a legal and accounting entity that is operated for the benefit of the
society as a whole, rather than for the benefit of an individual proprietor or a group of partners
or stock holders

Non profits do not have commercial owners and must rely on funds from contributions, membership dues
program revenues, fundraising events, public and private grants, and Investment income

Example: Civil organization: Colleges and Universities. Hospitals etc.

Answer: S22

Comparison between Main Financial Statements of a Non-profit Organization with Profit Organization

Basis Non-profit Organization Profit Organization

To know the assets and liabilities
To know the operations
To know the cash position
To know the owner's claim
For explanation
Other financial statement
Statement of financial position Balance sheet
Statement of activities Income statement
Statement of cash flows Statement of cash flows
No owner Statement of stockholders' equity
Notes to financial statements Notes to financial statements
Statement of functional expense There have no more
(for some organizations) financial statement

Answer: S23

Differences between non-profit organization and profit organization are as follows:

Basis Non-profit Organization Profit Organization

Definition A non-profit organization is a legal and A profit organization is a legal and
accounting entity that is operated for the accounting entity that is operated for
benefit of the society as a whole. the benefit of stockholders.
Owners None Stockholders
Primary mission Provide services needed by society Earn profits for stockholders
Secondary mission Ensure that revenues are greater than Provide services or sell goods
expenses so that the services provided can be
maintained or expanded
Main financial Statement of Financial Position Balance Sheet
statements required
Total assets-Total Net Assets Net Liabilities
Liabilities
Source of Fund Public funds Issue of Stock, Debenture
Additional Report Internal Revenue Service Securities and
Exchange Commission
Examples of Donor contribution, Program fees. Sales of merchandise, fees from
Revenue membership does, fundraising events grants service, investment income, gains on
and investment Income investment etc.
CSR Fully CSR Activities Some CSR Activities

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Answer: S24

The main differences between general purpose government and special purpose government are stated in
the following table:

Basis General Purpose Government Special Purpose Government

Service General Purpose government provide a wide Special purpose government provide
variety of services. only a single or just a few services.
Power Its typically have much more power over It has less power over citizens
citizens
Depends General purpose govt. are autonomous Special purpose government depends on
another govt. to function
Scope Its scope is wide. It is only a sub part
Examples Examples: Federal Government, State Examples: Independent School System,
Government Cities, Towns, Villages, Counties, Public Colleges and Universities, Public
Boroughs and Parishes. Hospitals. Fire Protection Division etc.

SET-3

1. Discuss in details the characteristics and weakness of governmental accounting system of

Bangladesh
2. Write the features of integrated accounting system followed by the nationalized industries in
Bangladesh.
3. How would you include integrated accounting system?

Answer: S31

The governmental accounting system in Bangladesh, like in many other countries, has its own unique
characteristics and weaknesses. Here, I will discuss these characteristics and weaknesses in detail:

Characteristics of Governmental Accounting System in Bangladesh:

1. Cash Basis: The governmental accounting system in Bangladesh primarily follows the cash basis
of accounting.
2. Budgetary Emphasis: The system places significant emphasis on the budgetary process.
3. Fund Accounting: The governmental accounting system in Bangladesh employs fund
accounting.
4. Government Accounting Standards: Bangladesh follows the Bangladesh Financial Reporting
Standards (BFRS) issued by the Institute of Chartered Accountants of Bangladesh (ICAB) for its
governmental accounting.
5. Transparency and Accountability: The system aims to enhance transparency and accountability
in the use of public funds.

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Weaknesses of Governmental Accounting System in Bangladesh:

1. Limited Accrual Accounting: The primary weakness of the governmental accounting system in
Bangladesh is its limited adoption of accrual accounting.
2. Inadequate Reporting and Disclosure: Despite efforts to improve transparency, the system still
faces challenges in terms of reporting and disclosure.
3. Complex Organizational Structure: Bangladesh's governmental accounting system is
characterized by a complex organizational structure, with multiple departments, agencies, and
levels of government involved in financial management.
4. Inconsistent Implementation: The implementation of accounting standards and practices can be
inconsistent across different government entities.
5. Limited Integration of Information Systems: Many government entities in Bangladesh
continue to rely on manual or outdated information systems, which can impede efficient financial
management and reporting.
6. Corruption and Fraud Risks: The governmental accounting system in Bangladesh, like in any
country, faces challenges related to corruption and fraud.

To address these weaknesses, there is a need for continued efforts to enhance the adoption of
accrual accounting, strengthen financial reporting standards, improve information systems, and
promote transparency and accountability in the management of public funds.

Answer: S32

Integrated accounting systems followed by nationalized industries in Bangladesh typically

possess the following features:

1. Comprehensive Financial Management: The integrated accounting systems in nationalized

industries aim to provide comprehensive financial management solutions.
2. Accrual Accounting Basis: Nationalized industries often employ accrual-based accounting to
ensure the proper recognition of revenue and expenses.
3. Cost Accounting: Integrated accounting systems for nationalized industries incorporate robust
cost accounting features.
4. Budgetary Control: These systems emphasize budgetary control by allowing the industry to set
budgets and monitor actual performance against the budgeted amounts.
5. Fund Management: Nationalized industries often have various funds for specific purposes, such
as development funds, welfare funds, or research funds.
6. Asset Management: Effective asset management is a crucial feature of integrated accounting
systems in nationalized industries.
7. Financial Reporting: These systems generate comprehensive financial reports, including income
statements, balance sheets, cash flow statements, and financial ratios.
8. Integration with Other Systems: Integrated accounting systems are designed to integrate with
other systems used by nationalized industries.
9. Internal Controls and Audit Trails: To ensure financial integrity and prevent fraud, integrated
accounting systems incorporate robust internal control mechanisms.
10. Compliance with Regulatory Requirements: Integrated accounting systems for nationalized
industries adhere to regulatory requirements and accounting standards specified by the
government.

These features collectively enable nationalized industries in Bangladesh to maintain accurate financial
records, make informed financial decisions, and ensure proper financial management.

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Answer: S33

1. Needs Assessment: Conduct a thorough needs assessment to understand the specific

requirements of the nationalized industry.
2. System Selection: Research and evaluate different integrated accounting software solutions
available in the market.
3. System Customization: Work with the selected software vendor to customize the integrated
accounting system based on the industry's specific needs.
4. Data Migration: Plan and execute the migration of existing financial data into the integrated
accounting system.
5. System Implementation: Develop an implementation plan that outlines the timeline, tasks,
responsibilities, and resources required for the successful deployment of the integrated accounting
system.
6. Integration with Existing Systems: Integrate the integrated accounting system with other
existing systems used in the nationalized industry, such as procurement systems, payroll systems,
or inventory management systems.
7. Ongoing Support and Maintenance: Establish a support structure to address any technical
issues or challenges that may arise after the implementation.
8. User Training and Continuous Learning: Provide ongoing training and support to users to
ensure they are proficient in using the integrated accounting system.
9. Monitoring and Evaluation: Regularly monitor and evaluate the performance and effectiveness
of the integrated accounting system.
10. Compliance and Regulatory Requirements: Ensure that the integrated accounting system
meets all relevant compliance and regulatory requirements applicable to the nationalized industry.

By following these steps and considerations, a nationalized industry can successfully include an
integrated accounting system that streamlines financial management processes, enhances data
accuracy, improves decision-making, and promotes transparency and accountability.

All Types of Fund ( Chapter 3-8)

SET-4

1. What is fund accounting?/ What are fund accounting systems?

2. What are the characteristics of fund accounting?
3. Why are financial activities of governmental organization managed through different types of
funds? Explain.

Answer: S41

Fund accounting is an accounting method used by organizations, particularly those in the public and
nonprofit sectors, to manage and track financial resources dedicated to specific purposes or activities.

It involves segregating financial resources into separate funds based on their source, purpose, or
restrictions placed on them.

In fund accounting, each fund is treated as a self-contained accounting entity with its own set of accounts
and financial statements.

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Answer: S42

Key characteristics of fund accounting include:

1. Segregation of Funds: Funds are separated based on their nature, such as general funds, special
revenue funds, capital project funds, or trust funds. Each fund has its own financial activities,
resources, and limitations.
2. Restricted Revenue: Funds may have revenue sources that are dedicated or restricted for specific
purposes. For example, grants, donations, or tax revenue allocated for specific programs or
projects are accounted for separately within the respective funds.
3. Specific Reporting Requirements: Financial statements are prepared for each fund, providing
detailed information about the fund's revenues, expenditures, assets, liabilities, and fund balances.
4. Budgetary Control: Budgets are established for each fund, and expenditures are monitored to
ensure compliance with the approved budget.
5. Interfund Transactions: Interactions between funds, such as transfers or reimbursements, are
recorded separately to maintain transparency and avoid commingling of resources.
6. Separate Legal Entity: Fund accounting treats each fund as a separate legal entity, ensuring the
separation of assets and liabilities.

Answer S43

The financial activities of government organizations are managed through different types of funds to
ensure proper allocation, accountability, and transparency in the use of public funds. Here are some
reasons why government organizations utilize different funds:

1. Legal and Regulatory Requirements: Government organizations are often subject to legal and
regulatory frameworks that dictate the management and use of public funds.
2. Resource Allocation and Control: Different funds allow government organizations to allocate
resources to specific purposes or programs.
3. Revenue Source Restrictions: Government organizations receive revenues from various sources,
such as taxes, fees, grants, and donations.
4. Budgetary Control and Reporting: Managing financial activities through different funds allows
for effective budgetary control and reporting.
5. Accountability and Transparency: Using different funds enhances accountability and
transparency in the utilization of public funds.
6. Financial and Performance Evaluation: Managing financial activities through different funds
enables better evaluation of financial performance and program effectiveness.

In summary, the use of different types of funds by government organizations ensures compliance
with legal and regulatory requirements, facilitates resource allocation and control, segregates
revenue sources, supports budgetary control and reporting, enhances accountability and
transparency, and enables financial and performance evaluation. These benefits collectively
contribute to responsible financial management and effective utilization of public funds.

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SET-5

1. Why govt. accounting is called fund accounting?

2. "A fund has both legal and accounting entity." Explain
3. The operation of general fund is guided by budget, do you agree? If so,
show your argument.

Answer S51

Government accounting is often referred to as "fund accounting" because it follows a system where
financial resources are segregated and managed in different funds. The term "fund accounting" highlights
the emphasis on the management and accountability of funds in governmental entities. Here are the
reasons why government accounting is called fund accounting:

1. Segregation of Funds: In government accounting, financial resources are categorized and tracked
based on their sources, purposes, or restrictions.
2. Distinct Accounting Entity: Under fund accounting, each fund is treated as a distinct accounting
entity.
3. Focus on Accountability: Fund accounting places a strong emphasis on accountability for the use
of public funds.
4. Compliance with Legal and Regulatory Requirements: Many governments have legal and
regulatory frameworks that dictate how public funds should be managed.
5. Restricted Revenue and Budgetary Control: Fund accounting is particularly suited for handling
restricted revenue and budgetary control.
6. Comprehensive Financial Reporting: Fund accounting facilitates comprehensive financial
reporting by generating separate financial statements for each fund.

Overall, the term "fund accounting" is used in government accounting to emphasize the focus on
managing and accounting for financial resources through separate funds.

Answer: S52

A fund in the context of accounting has both a legal and accounting entity, meaning it is recognized and
treated as a separate entity for legal and accounting purposes. Let's explore the concept further:

1. Legal Entity: From a legal standpoint, a fund is established as a separate legal entity. It is
typically created through specific legislation, regulations, or governing documents that define its
purpose, powers, and operational framework.
2. Accounting Entity: In the realm of accounting, a fund is also treated as a distinct accounting
entity. It is separate from the entity or organization that establishes and oversees the fund.

The recognition of a fund as a legal and accounting entity has several implications:

1. Financial Reporting: As a separate accounting entity, a fund is required to prepare its own
financial statements.
2. Budgeting and Expenditure Control: Treating a fund as a separate accounting entity allows for
effective budgeting and expenditure control.
3. Legal Obligations and Liabilities: By recognizing a fund as a separate legal entity, it can enter
into legal agreements, hold assets, and assume liabilities in its own name.

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 4. Accountability and Transparency: Establishing a fund as a legal and accounting entity enhances
accountability and transparency.

In summary, a fund is recognized as both a legal and accounting entity. Its legal entity status provides it
with legal rights and responsibilities, while its accounting entity status ensures that its financial activities
are accounted for separately.

Answer: S53

Yes, I agree that the operation of the general fund is guided by the budget. The budget serves as a crucial
tool in planning, controlling, and monitoring the financial activities of the general fund. Here are the
arguments to support this statement:

1. Resource Allocation: The budget outlines the allocation of financial resources to various
activities, programs, and departments within the government entity.
2. Expenditure Control: The budget sets spending limits and provides guidelines for expenditure
control within the general fund.
3. Revenue Forecasting: The budget includes revenue projections for the general fund, estimating
the inflow of financial resources from various sources, such as taxes, fees, and grants.
4. Financial Planning: The budget serves as a financial planning tool for the general fund. It
enables government entities to anticipate and plan for future expenses, revenue needs, and
funding priorities.
5. Performance Measurement: The budget establishes performance targets and indicators that
allow for the evaluation of the general fund's financial performance.
6. Transparency and Accountability: The budget enhances transparency and accountability in the
operation of the general fund.
7. Financial Reporting: The budget serves as a reference point for financial reporting related to the
general fund.

Overall, the budget plays a crucial role in guiding the operation of the general fund. It influences
resource allocation, expenditure control, financial planning, performance measurement, transparency,
accountability, and financial reporting.

SET-6

1. What is general fund? What are the benefits of establishing general fund?/ What are the
advantages of general fund?
2. What are the characteristics of general fund?
3. Who are the customers of internal service fund?
4. Distinguish between permanent funds and debt service funds?

Answer: S61

The general fund is a primary and central fund in government accounting that serves as the main
operating fund for a government entity.

It represents the financial resources used to support the day-to-day operations, activities, and services of
the government entity, such as administrative expenses, public safety, education, and infrastructure

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maintenance. The general fund is typically funded by a variety of revenue sources, including taxes, fees,
fines, and intergovernmental transfers.

Benefits of establishing a general fund include:

1. Centralized Financial Management: The general fund provides a centralized structure for
financial management within a government entity.
2. Flexibility and Adaptability: The general fund offers flexibility in resource allocation.
3. Core Service Provision: The general fund ensures the continuity of essential services provided by
the government entity.
4. Stabilization and Contingency Planning: The general fund serves as a buffer against financial
uncertainties and economic fluctuations.
5. Transparency and Accountability: Establishing a general fund enhances transparency and
accountability in financial management.
6. Financial Planning and Control: The general fund enables effective financial planning and
control within a government entity.
7. Simplified Reporting: The existence of a separate general fund simplifies financial reporting and
auditing processes.

Overall, the establishment of a general fund provides a dedicated financial structure for the day-to-
day operations and core services of a government entity.

Answer: S62

The general fund, as the primary operating fund in government accounting, possesses several key
characteristics. Here are the common characteristics of a general fund:

1. Broad Scope: The general fund encompasses a wide range of activities and services provided by
the government entity.
2. Primary Operating Fund: The general fund serves as the primary fund for day-to-day operations
and activities of the government entity.
3. Diverse Revenue Sources: The general fund receives revenue from various sources. These
sources can include taxes (such as income tax, property tax, sales tax), fees, fines, licenses,
grants, intergovernmental transfers, and other forms of income.
4. Flexibility in Resource Allocation: The general fund allows for flexibility in resource allocation.
5. Operating Budget: The general fund operates under an annual budget that outlines the projected
revenues and authorized expenditures for a specific fiscal year.
6. Financial Control and Accountability: The general fund adheres to stringent financial control
and accountability measures.
7. Surplus and Reserve Management: The general fund may accumulate surpluses and reserves.
8. Reporting and Disclosure: The general fund requires comprehensive financial reporting and
disclosure.
9. Interrelation with Other Funds: The general fund may have financial interactions with other
funds within the government entity.

In summary, the general fund exhibits characteristics such as a broad scope, primary operating
function, diverse revenue sources, flexibility in resource allocation, adherence to budgets, financial
control, surplus and reserve management, reporting requirements, and interrelation with other funds.

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Answer: S63

The customers of an internal service fund are typically the various departments or divisions within the
same government entity or organization that operates the internal service fund.

The primary customers of an internal service fund can include:

1. Other Government Departments: Internal service funds often serve other government
departments or agencies within the same organization.
2. Administrative Units: Administrative units within the organization, such as finance, accounting,
payroll, and budgeting, can also be customers of an internal service fund.
3. Employee Benefit Programs: Internal service funds can also cater to employee benefit programs
within the organization.
4. Shared Services: In organizations where shared services are implemented, an internal service
fund can serve as the provider of shared services.
5. Any Entity within the Organization: Depending on the structure and needs of the organization,
an internal service fund can have a broader customer base, extending services to any entity within
the organization that requires specialized goods or services.

By establishing an internal service fund, organizations can centralize and streamline the provision of
certain goods and services, ensuring efficient and cost-effective service delivery to internal customers.

Answer: S64

Permanent funds and debt service funds are two distinct types of funds in government accounting. Here's
a comparison highlighting the key differences between them:

Basis Permanent Funds Debt Service Funds

Purpose: Permanent funds are established to account
for and manage resources that are legally
restricted for the purpose of generating
income or providing benefits in perpetuity.
Nature of Permanent funds typically consist of
Resources: donations, endowments, or other types of
resources that are intended to be held in
perpetuity.
Time Horizon Permanent funds are designed to have a long-
term perspective, aiming to generate income
or benefits indefinitely.
Use of The resources in permanent funds are utilized
Resources to generate income or benefits that support
specific programs, activities, or beneficiaries.
Financial Permanent funds are reported separately in the
Reporting: financial statements, highlighting the principal
amount, investment income, and any changes
in the fund's balance over time.
Debt service funds are created to
account for and manage financial
resources that are dedicated to the
repayment of debt obligations.
Debt service funds are funded by
specific revenue sources dedicated to
debt repayment.
Debt service funds have a shorter time
horizon, typically aligned with the
term of the debt obligations being
serviced.
The resources in debt service funds
are solely dedicated to debt
repayment.
Debt service funds are also reported
separately in the financial statements,
focusing on the accumulation of
resources and the payments made for
debt service.

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In summary, permanent funds and debt service funds differ in their purpose, nature of resources, time
horizon, use of resources, and financial reporting.

SET-7

1. What is Capital Project fund? What are the accounting characteristics of Capital project
fund?
2. Differentiate between capital project fund & Capital improvement fund?
3. What is enterprise find? What are the characteristics of enterprise fund?
4. “Govt. fund expenditure should be recognized in the accounting period in which the fund
liability occurs” Explain

Answer: S71

A Capital Project Fund is a type of governmental fund that is used to account for and manage financial
resources specifically dedicated to the acquisition or construction of major capital assets, such as
buildings, infrastructure projects, equipment, or land.

The fund is created to ensure proper financial control and accountability for capital projects and to track
the inflow and outflow of funds related to those projects.

The accounting characteristics of a Capital Project Fund include:

1. Restricted Revenue: The resources in a Capital Project Fund are typically derived from specific
revenue sources that are legally restricted for capital projects.
2. Project-Specific Focus: The Capital Project Fund is established to account for resources
associated with a particular capital project or a group of related projects.
3. Fixed Asset Accounting: The Capital Project Fund maintains detailed records of the acquisition,
construction, and improvement of capital assets.
4. Budgetary Control: The Capital Project Fund operates under a separate capital project budget,
which outlines the authorized funding for specific projects.
5. Time-Limited Fund: The Capital Project Fund has a time-limited existence, typically aligned
with the duration of the capital project(s) it is created for.
6. Capital Project Expenditures: The expenditures recorded in the Capital Project Fund are specific
to capital projects and include costs directly associated with the acquisition, construction, or
improvement of capital assets.
7. Fixed Asset Accounting: The Capital Project Fund tracks the acquisition, construction, and
improvement of capital assets until their completion.
8. Financial Reporting: The Capital Project Fund is reported separately in the financial statements
to provide transparency and accountability.

Overall, the Capital Project Fund provides a dedicated accounting mechanism to manage and monitor
financial resources specifically allocated for capital projects. It ensures proper tracking of project-
related revenues, expenditures, and fund balances, contributing to effective financial control, project
oversight, and accountability.

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Answer: S72

While both the Capital Project Fund and the Capital Improvement Fund are types of funds used in
government accounting, they serve different purposes and have distinct characteristics. Here's a
comparison between the two:

Basis Capital Project Fund Capital Improvement Fund:

Purpose The Capital Project Fund is established
to account for and manage financial
resources specifically dedicated to the
acquisition or construction of major
capital assets, such as buildings,
infrastructure projects, equipment, or
land.
Nature of Projects The Capital Project Fund is primarily
concerned with the acquisition or
construction of new capital assets or
facilities.
Funding Sources The resources in a Capital Project Fund
are typically derived from specific
revenue sources dedicated to financing
the particular capital project(s).
Time Horizon The Capital Project Fund has a defined
time horizon that aligns with the duration
of the capital project(s) it is created for.
Financial Reporting The Capital Project Fund is reported
separately in the financial statements to
provide transparency and accountability
for the specific capital project(s).
The Capital Improvement Fund, on the
other hand, is created to account for
and manage financial resources set
aside for general capital improvements
and enhancements to existing assets.
The Capital Improvement Fund
focuses on enhancing or improving
existing capital assets, such as
buildings, infrastructure, or equipment.
The Capital Improvement Fund is
funded by various revenue sources,
which can include general revenues,
transfers from other funds, grants, or
specific allocations set aside for capital
improvements.
The Capital Improvement Fund is
ongoing and does not have a specific
time limit.
The Capital Improvement Fund may be
reported separately or combined with
other funds in the financial statements.

In summary, the Capital Project Fund focuses on specific capital projects, such as the acquisition or
construction of new assets, while the Capital Improvement Fund covers a broader range of improvements
to existing assets.

Answer: S73

An Enterprise Fund is a type of fund used in government accounting to account for and manage financial
resources associated with activities that are primarily business-like in nature.

These activities are typically self-supporting, meaning they generate enough revenue to cover their
operating expenses, debt service, and capital expenditures.

The characteristics of an Enterprise Fund are as follows:

1. Revenue Generation: Enterprise Funds are established for revenue-generating activities that
operate similarly to commercial businesses.
2. User Fees and Charges: Enterprise Funds primarily rely on user fees, charges, or rates to
generate revenue.

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 3. Cost Recovery: Enterprise Funds aim to achieve full or partial cost recovery through their
revenue-generating activities.
4. Financial Independence: Enterprise Funds operate with a high degree of financial autonomy
from the general government funds.
5. Business-Like Operations: The activities within an Enterprise Fund are managed and operated in
a business-like manner.
6. Separate Reporting: Enterprise Funds are reported separately in the financial statements to
provide transparency and accountability.
7. Long-Term Perspective: Enterprise Funds typically have a long-term perspective and focus on
sustained financial viability and stability.
8. Limited Subsidies: Enterprise Funds are expected to operate on a self-supporting basis,
minimizing the need for subsidies from other government funds.

The use of an Enterprise Fund allows governments to separate financially self-sustaining activities from
other government operations, ensuring that the costs and revenues associated with these activities are
accurately accounted for and transparently reported.

Answer: S74

The statement "Government fund expenditure should be recognized in the accounting period in which the
fund liability occurs" refers to the principle of recognizing and recording expenses in government
accounting when the liability is incurred, rather than when the payment is made.

In government accounting, the focus is on accurately reflecting the financial transactions and events that
occur during a specific accounting period. The principle mentioned ensures that expenses are recognized
in the period in which the government incurs an obligation or a liability, regardless of when the actual
payment is made. This is known as the accrual basis of accounting.

Here are a few key points to further explain the concept:

1. Accrual Basis Accounting: Government accounting generally follows the accrual basis of
accounting, which requires the recognition of revenues and expenses when they are earned or
incurred, respectively, rather than when cash is received or paid.
2. Fund Liability: A fund liability refers to an obligation or a commitment by the government to
make a future payment for goods, services, or other financial obligations. When the government
enters into a contractual agreement or incurs an obligation that gives rise to a fund liability, the
associated expenditure is recognized.
3. Matching Principle: The principle of recognizing fund expenditure in the period of liability
occurrence is based on the matching principle.
4. Measurement of Expenditure: The recognition of expenditure in the period of liability
occurrence involves measuring the amount of the liability based on the best estimate of the
obligation.
5. Accruals and Adjustments: To reflect the expenditure in the period of liability occurrence,
accruals and adjustments may be necessary.
6. Financial Statements: By recognizing fund expenditure in the accounting period of liability
occurrence, the financial statements accurately depict the government's financial position, results
of operations, and cash flow.

Overall, recognizing government fund expenditure in the period of liability occurrence ensures that
expenses are appropriately matched with related revenues or benefits. It promotes financial accuracy,

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accountability, and transparency in government accounting by focusing on the economic substance of
transactions rather than the timing of cash flows.

SET-8

1. What is internal service fund?

2. What are the advantages of establishing internal servicing fund?
3. What kinds of activities are accounted for an internal service fund?
4. What are the alternative methods of dissolving an internal service fund?
5. Which factor should be considered in choosing the appropriate method?

Answer: S81

An Internal Service Fund is a type of fund used in governmental accounting to account for and manage
financial resources that are provided by one department or agency of the government to other departments
or agencies within the same government entity.

The primary purpose of an Internal Service Fund is to provide goods or services on a cost-reimbursement
basis to the departments or agencies it serves, acting as an internal service provider.

Answer: S82

Establishing an Internal Service Fund in government accounting offers several advantages for a
government entity. Here are some key benefits of implementing an Internal Service Fund:

1. Cost Control and Efficiency: An Internal Service Fund promotes cost control and efficiency by
centralizing support services within the government entity.
2. Service Quality and Consistency: The Internal Service Fund focuses on providing high-quality
services to the departments or agencies it serves.
3. Cost Recovery and Financial Sustainability: An Internal Service Fund operates on a cost-
recovery basis, charging user departments or agencies for the services provided.
4. Transparent and Accountable Financial Reporting: The establishment of an Internal Service
Fund necessitates maintaining separate accounting records and financial statements.
5. Flexibility and Adaptability: An Internal Service Fund provides flexibility and adaptability in
meeting the changing needs of the government entity.
6. Internal Collaboration and Cooperation: By centralizing support services, an Internal Service
Fund encourages collaboration and cooperation among departments or agencies within the
government entity.
7. Performance Evaluation and Improvement: The Internal Service Fund facilitates performance
evaluation and improvement.

Overall, establishing an Internal Service Fund offers numerous advantages, including cost control, service
quality, financial sustainability, transparency, flexibility, collaboration, and performance improvement. It
enhances the efficiency and effectiveness of government operations, leading to better utilization of
resources and improved service delivery to internal customers.

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Answer: S83

An Internal Service Fund accounts for various activities that provide support services to departments or
agencies within the same government entity.

The specific activities accounted for in an Internal Service Fund may vary depending on the needs and
structure of the government organization.

However, here are some common activities that are typically accounted for in an Internal Service Fund:

1. Information Technology Services: An Internal Service Fund may provide information

technology services such as software development, system maintenance and support, network
infrastructure management, data storage and backup, helpdesk support, and technology
procurement.
2. Human Resources Services: This includes personnel administration, recruitment and hiring
processes, employee benefits management, payroll processing, training and development
programs, employee relations, and performance management.
3. Purchasing and Procurement Services: An Internal Service Fund may handle centralized
purchasing and procurement activities, including vendor management, contract negotiation,
procurement of goods and services, and inventory control.
4. Facilities and Property Management: Services related to the management and maintenance of
government-owned buildings, facilities, and properties can be accounted for in an Internal Service
Fund. This includes building maintenance, repairs, security services, custodial services, lease
management, and space planning.
5. Fleet Management: An Internal Service Fund may manage and maintain the government entity's
fleet of vehicles, including acquisition, maintenance, repairs, fuel management, vehicle tracking,
and disposal.
6. Printing and Reproduction Services: This involves centralized printing and reproduction
services, such as printing of documents, forms, brochures, reports, and other materials needed by
the government entity.
7. Centralized Mail and Messenger Services: The Internal Service Fund may handle the collection,
sorting, distribution, and delivery of internal mail and packages within the government
organization.
8. Financial and Accounting Services: An Internal Service Fund may provide financial and
accounting services to the departments or agencies, including budgeting, financial reporting,
accounts payable, accounts receivable, billing, and internal control.
9. Communication and Public Relations: Services related to communication and public relations,
such as media relations, public information campaigns, website management, and social media
management, may also be accounted for in an Internal Service Fund.
10. Training and Development Services: The Internal Service Fund may offer centralized training
and development programs, workshops, and seminars to enhance the skills and knowledge of
employees within the government entity.

These are just some examples of activities that can be accounted for in an Internal Service Fund. The
specific services provided may vary depending on the needs, priorities, and organizational structure of the
government entity.

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Answer: S84

When an Internal Service Fund is no longer needed or its services are no longer required, there are several
alternative methods of dissolving or discontinuing the fund.

The choice of method may depend on factors such as the government entity's specific circumstances,
legal requirements, and financial considerations.

Here are some common methods of dissolving an Internal Service Fund:

1. Transfer of Services: One option is to transfer the services provided by the Internal Service Fund
to another department or agency within the government entity.
2. Outsourcing: Instead of providing the services internally through the Internal Service Fund, the
government entity may choose to outsource the services to external vendors or contractors.
3. Incorporation as a Separate Entity: In some cases, the Internal Service Fund may be
transformed into a separate legal entity, such as a government corporation or a separate
governmental unit.
4. Integration into General Operations: If the services provided by the Internal Service Fund can
be effectively and efficiently absorbed into the general operations of the government entity, they
can be integrated accordingly.
5. Phase-Out and Closure: Another method is to gradually phase out the operations of the Internal
Service Fund. This involves a planned approach to wind down the fund's activities over a specific
timeframe.
6. Reorganization or Restructuring: Depending on the circumstances, reorganizing or restructuring
the Internal Service Fund may be an option.

It's important to note that the specific method chosen for dissolving an Internal Service Fund will depend
on various factors and considerations unique to the government entity.

Answer: S85

When choosing the appropriate method for dissolving an Internal Service Fund, several factors should be
considered to ensure a smooth and effective transition. These factors include:

1. Service Continuity: The primary consideration is to ensure uninterrupted service delivery to the
departments or agencies that rely on the services provided by the Internal Service Fund.
2. Cost Considerations: Financial implications play a significant role in selecting the appropriate
method.
3. Legal and Regulatory Requirements: The chosen method must align with the legal and
regulatory framework governing the government entity.
4. Organizational Structure and Culture: The structure and culture of the government entity should
be taken into account.
5. Stakeholder Engagement: Stakeholder engagement is crucial during the decision-making
process.
6. Implementation Complexity: Assess the complexity and feasibility of implementing each
method.
7. Long-Term Viability and Sustainability: Consider the long-term viability and sustainability of
the chosen method.

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By carefully considering these factors, the government entity can make an informed decision regarding
the most appropriate method for dissolving an Internal Service Fund.

SET-9

1. Explain the distinction between agency fund and trust fund?

2. Why are fiduciary fund used by governmental units?
3. Why do agency funds have no fund equity?
4. Is it Possible for a permanent agency fund to have no assets and liabilities at the end of
fiscal year?

Answer: S91

An agency fund and a trust fund are two different types of funds used in financial and accounting
contexts, each with its own characteristics and purposes. Here's an explanation of the distinction between
the two:

1. Agency Fund:

 An agency fund is a type of fund established to account for assets held by one party (the
"agent") on behalf of another party (the "principal").
 The agent, who is typically a government or nonprofit organization, holds and manages
the assets but has no ownership rights over them.
 The principal retains legal ownership and control over the assets, while the agent's role is
merely to administer or distribute the funds based on specific instructions or regulations.
 Agency funds are often used to account for collections or resources that are temporarily
held until they are disbursed to the intended recipients.
 Examples of agency funds include tax collection agencies holding funds on behalf of
various government departments, or nonprofit organizations acting as fiscal agents for
grant funds.

2. Trust Fund:

 A trust fund is a legal entity or arrangement where assets are held and managed by one
party (the "trustee") on behalf of another party (the "beneficiary").
 The trustee has a fiduciary duty to manage the assets in the best interest of the
beneficiary, following the terms and conditions specified in a trust agreement or legal
instrument.
 The beneficiary has an equitable or beneficial interest in the assets, meaning they have
the right to receive the income or principal from the trust based on the terms of the trust.
 Trust funds are often established to protect and manage assets for specific purposes, such
as providing for education, healthcare, charitable endeavors, or managing inheritances.
 Trust funds can be established during a person's lifetime (living trusts) or through a will
upon their death (testamentary trusts).

In summary, the key distinction between an agency fund and a trust fund lies in the relationship between
the parties involved and the purpose of the fund. An agency fund involves one party holding assets on
behalf of another party temporarily, while a trust fund involves the trustee managing assets for the long-
term benefit of a specified beneficiary based on the terms of a trust agreement.

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Answer: S92

Fiduciary funds are used by governmental units to account for and manage assets that the government
holds in a fiduciary capacity, meaning they have a responsibility to manage those assets in the best
interest of others.

Here are some reasons why governmental units utilize fiduciary funds:

1. Legal Obligations: Governmental units often have legal obligations to manage certain funds on
behalf of others.
2. Trust and Confidence: By establishing fiduciary funds, governmental units can enhance trust and
confidence in their financial management.
3. Restricted Funds: Fiduciary funds are particularly useful for managing restricted funds that have
specific limitations on their use.
4. Third-Party Resources: Governmental units often act as custodians or intermediaries for
resources that belong to external parties.
5. Legal Compliance: The use of fiduciary funds helps governmental units adhere to legal and
regulatory requirements related to the management of assets held in a fiduciary capacity.

Overall, the use of fiduciary funds allows governmental units to demonstrate their responsible
stewardship of resources held on behalf of others, ensuring compliance with legal obligations,
transparency, and proper management of restricted or designated funds.

Answer: S93

Agency funds have no fund equity because they represent assets held by one party (the agent) on behalf of
another party (the principal). The agency is essentially a custodian or intermediary for the funds, and its
role is limited to collecting, holding, and distributing the resources based on specific instructions or
regulations.

Here are a few reasons why agency funds do not have fund equity:

1. No Ownership: In agency relationships, the agent does not have ownership rights or beneficial
interest in the assets held.
2. No Financial Interest: The agent does not derive any financial benefits or income from the assets
held in the agency fund.
3. Merely a Custodial Role: The agent's role in an agency fund is typically limited to custodial
responsibilities, such as collecting and distributing funds as directed by the principal.
4. Temporary Nature: Agency funds often involve the temporary holding of funds until they are
disbursed to the intended recipients or used for their designated purposes.

In summary, agency funds do not have fund equity because they represent assets held by an agent on
behalf of a principal, without any ownership or financial interest on the part of the agent. The agent's role
is primarily custodial, and the funds are held temporarily until they are disbursed or used for the
principal's benefit.

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Answer: S94

It is possible for a permanent agency fund to have no assets and liabilities at the end of a fiscal year, but it
would be unusual.

A permanent agency fund is typically established to hold and manage resources that are intended to be
held in perpetuity or for an extended period, with the income or earnings generated used to support a
specific purpose. These funds are often created for endowments, scholarships, or other long-term financial
arrangements.

The purpose of a permanent agency fund is to preserve and grow the principal amount while utilizing the
income or earnings for the designated purpose. Therefore, it is expected that a permanent agency fund
would have assets in the form of investments or cash, which would generate income or returns over time.

However, there can be situations where a permanent agency fund might not have any assets or liabilities
at the end of a fiscal year. Some possible scenarios include:

1. Complete Distribution: If the fund's purpose has been fulfilled, or if the assets have been
completely disbursed or transferred to another entity, the fund might no longer hold any assets or
liabilities.
2. Negative Returns: In some cases, poor investment performance or market fluctuations can result
in a reduction in the value of the fund's assets, potentially leading to a situation where the assets
are depleted or reduced to zero at the end of the fiscal year.
3. Administrative Changes: If there have been changes in the fund's administration or management,
such as transferring the assets to another fund or entity, it could result in a temporary situation
where no assets or liabilities exist until the transition is completed.

In summary, while it is possible for a permanent agency fund to have no assets or liabilities at the end of a
fiscal year due to specific circumstances, it would typically be atypical, considering the purpose and
nature of such funds.

(C-9) Budget for govt. resource management:

SET-10

1. What is the modern concept of budget?

2. What should be the merits and demerits if Bangladesh government go after deficit
budget?
3. Distinguish between balanced budget and unbalanced budget.
4. Do you think that deficit financing is suitable for economic development of
Bangladesh? If so, show your arguments.

Answer: S10-1

The modern concept of a budget refers to a comprehensive financial plan that outlines an organization's or
government's anticipated revenues, expenditures, and financial goals for a specific period, typically one
fiscal year.

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The concept has evolved over time to encompass broader aspects beyond traditional financial planning.

Here are some key elements of the modern concept of a budget:

 Strategic Planning:
 Performance-Based Budgeting:
 Flexible and Rolling Budgets:
 Outcome-Oriented Budgeting:
 Stakeholder Engagement:
 Technology and Data-Driven Approaches:

In summary, the modern concept of a budget is more than just a financial plan. It involves strategic
planning, performance measurement, flexibility, outcome orientation, stakeholder engagement, and the
use of technology and data analytics.

Answer: S10-2

When a government chooses to pursue a deficit budget, meaning its expenditures exceed its revenues,
there can be both merits and demerits to consider. Here are some potential advantages and disadvantages
of the Bangladesh government adopting a deficit budget:

Merits of a Deficit Budget:

1. Stimulating Economic Growth: A deficit budget allows the government to increase spending on
infrastructure projects, social programs, or economic stimulus measures. This injection of funds
into the economy can stimulate demand, create employment opportunities, and drive economic
growth.
2. Addressing Critical Needs: A deficit budget can be used to address pressing needs or crises, such
as investing in healthcare, education, poverty reduction, or disaster recovery.
3. Financing Development Projects: By utilizing deficit financing, the government can fund major
development projects that require substantial upfront investments.
4. Managing Revenue Shortfalls: In situations where government revenues are temporarily reduced
due to economic downturns, natural disasters, or external shocks, a deficit budget can provide a
means to bridge the gap and maintain essential services without drastic spending cuts.

Demerits of a Deficit Budget:

1. Increased Debt Burden: Running a deficit budget often leads to increased borrowing, resulting in
a higher public debt burden.
2. Inflation and Economic Instability: Deficit financing can contribute to inflationary pressures if
the increased government spending exceeds the capacity of the economy to produce goods and
services.
3. Dependency on External Financing: If the government relies heavily on external borrowing to
cover the deficit, it can make the economy vulnerable to external shocks and fluctuations in
global financial markets.
4. Crowding Out Private Investment: When the government competes for funds in the financial
market to finance its deficit, it can potentially crowd out private sector investment.
5. Future Fiscal Challenges: Deficit budgets, especially if sustained over the long term, can create
challenges for future generations.

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It is important for the government to carefully consider the economic conditions, fiscal sustainability, and
the potential trade-offs associated with adopting a deficit budget. Prudent fiscal management, effective
debt management strategies, and a focus on achieving sustainable economic growth are crucial to
minimize the negative impacts and ensure long-term economic stability.

Answer: S10-3

A balanced budget and an unbalanced budget are two contrasting concepts related to government
finances. Here's how they differ:

Balanced budget Unbalanced budget

A balanced budget is one in which the Unbalanced budget: an unbalanced budget is one in
government’s expenditure is the same as its which the income and the expenditure are not equal
revenues. to each other.
In case of balanced budget, the proposed In case of unbalanced budget the proposed
government expenditure is equal to the estimated
expenditure and the estimated receipt are unequal
government receipts in the budget year. during the budget year.
Balanced budget reduces unproductive and Unbalanced or deficit budget helps the government
extravagant expenditure of the government. to incur unproductive and extravagant expenditure
It is ineffective during economic instability It is effective during economic in a stability (surplus
during inflation and deficit during deflation)
It fails to achieve full employment from under Unbalanced budget is a powerful instrument to
employment equilibrium achieve full employment
It cannot solve the problems of underdeveloped Unbalanced budget is a powerful instrument of
countries resource mobilization for economic development of
underdeveloped countries.

Answer: S10-4

Yes, I think that deficit financing is suitable for economic development of Bangladesh. My arguments in
favor of this statement are as follows:

1. Promoting economic development: deficit financing is the most useful method of promoting
economic development in less developed countries higher the sufficient private investment is not
forthcoming.
2. Developing economic and social overhead: major economic development and social overheads
such as basic infrastructures projects are financed by deficit financing.
3. Augments community saving: deficit financing, by increasing money incomes arguments
community savings. It is an effective instrument of forced saving.
4. Raise the income of entrepreneurs: deficit financing tends to raise the income of the
entrepreneurial class, which has a high propensity to save.
5. Expansionary: deficit financing is always expansionary in its effects. Deficit financing is
considered valuable for capital formation in underdeveloped countries.

❖ Some other arguments are:

 To finance defense expenditure during war

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  To lift the economy out of depression so that incomes, employment, investment etcetera
all rise.
 To activate idle resources as well as diverting resources from unproductive sectors to
productive sectors with the objective of increasing national income and hence, higher
economic growth.
 To raise capital formation by mobilizing forced savings made through deficit financing.
 To mobilize resources to finance massive plan expenditure.

SET-11

1. Describe the steps in preparing the government's budget in Bangladesh.

2. “Because budgetary accounts are used by governmental units, their financial statements
can never be said to be in accord with GAAP.” -comment.
3. “Government fund’s expenditure should be recognized in the accounting period in which
the fund liabilities occur.” -is this a statement true or false? Explain your concern.

Answer: S11-1

The steps in preparing the government's budget in Bangladesh are given below:

 Firstly, the finance division issued a budget circular shortly BC with preliminary indicative
expenditure ceiling for each line ministry.
 Secondly, the line ministry prepares ministry budget framework shortly MBF with the help of
department or agencies.
 The Finance division and Planning Commission jointly review and finalize agreed budget
numbers and MBFs.
 Fourthly, the finance division issued budget circular 2 with ministry wise indicative expenditure
ceiling.
 The estimates are reviewed and finalized by the finance division.
 Finally, the budget is presented to parliament.

Answer: S11-2

The statement that "Because budgetary accounts are used by governmental units, their financial
statements can never be said to be in accord with GAAP (Generally Accepted Accounting Principles)" is
not entirely accurate. While it is true that governmental units often utilize budgetary accounts, it does not
mean that their financial statements are inherently non-compliant with GAAP.

GAAP provides a set of accounting principles and guidelines that guide the preparation and presentation
of financial statements for various entities, including governmental units. Governments are required to
follow specific accounting standards tailored to their unique circumstances, such as the Governmental
Accounting Standards Board (GASB) standards in the United States.

Governmental accounting standards aim to provide transparency and accountability in reporting financial
information for governmental units. They address the distinct characteristics of government operations,
such as fund accounting, budgetary controls, and the accounting treatment of taxes, grants, and
intergovernmental transactions.

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While budgetary accounts may be used to track the planned and actual inflows and outflows of financial
resources, they are just one component of governmental financial reporting. Governmental financial
statements encompass a broader scope, including comprehensive annual financial reports (CAFR) that
provide detailed information on the financial position, results of operations, and cash flows of the
government entity.

These financial statements are expected to adhere to the relevant accounting standards, which are
designed to align with GAAP principles to the extent possible within the governmental context. Adhering
to GAAP ensures consistency, comparability, and reliability in financial reporting for governmental units.

Answer: S11-3

The statement "Government fund's expenditure should be recognized in the accounting period in which
the fund liabilities occur" is generally true.

In governmental accounting, expenditures are recognized when the underlying liability is incurred. This
concept is known as the "modified accrual basis of accounting," which is commonly used in government
financial reporting. Under this basis, revenues are recognized when they become measurable and
available, while expenditures are recognized when the liability is incurred.

When a government incurs an obligation or liability to make a payment, it is considered an expenditure.

The timing of recognizing the expenditure depends on the nature of the liability. Generally, the liability
arises when goods are received, services are rendered, or contractual obligations are met.

For example, if a government purchases office supplies from a vendor, the expenditure is recognized
when the supplies are received or the liability to pay the vendor arises. Similarly, if a government enters a
contract for construction services, the expenditure is recognized as the work progresses and the liability to
pay the contractor arises.

In summary, the general principle is that government fund's expenditure should be recognized in the
accounting period in which the fund liabilities occur. This principle ensures that financial reporting
accurately reflects the timing of obligations and liabilities incurred by the government.

SET-12

1. Describe when and how a governmental unit records a budget and causes it out.

2. Distinguish between :

A. Expenditure and encumbrance.

B. Revenue and estimated revenue.
C. Reserve for encumbrance and encumbrance.
D. Reserve for encumbrance and fund balance.

3. Is there any necessity for a governmental unit to use the same expenditure classification
systems in its general accounting as in its budget?

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Answer: S12-1

A governmental unit records a budget during the budgeting process before the fiscal year begins.

Some key points about when and how a governmental unit records a budget and carries it out:

1. Timing: The budgeting process typically occurs before the start of the fiscal year or budget
period to allow for proper planning and resource allocation.
2. Budget Preparation: During the budgeting process, the governmental unit estimates expected
revenues and allocates funds for various programs, services, and expenditures.
3. Approval and Adoption: The proposed budget undergoes review and approval by relevant
authorities, such as a governing body or legislature, before being formally adopted as the official
financial plan.
4. Execution and Monitoring: Once adopted, the government unit implements the budget through
its financial management systems. Actual revenues and expenditures are monitored throughout
the budget period to ensure adherence to the budgeted amounts.
5. Adjustments: If needed, adjustments may be made to the budget during the budget period due to
changes in revenue projections, unexpected expenses, or shifting priorities. These adjustments are
subject to appropriate approval processes.
6. Closeout Evaluation: At the end of the budget period, a closeout report is prepared to assess the
actual financial results compared to the budgeted amounts. This evaluation helps identify any
variances or deviations and informs future budgeting decisions.
7. Transparency and Accountability: The budgeting process and the execution of the budget aim to
ensure transparency and accountability in financial management. Public input, review processes,
and financial reporting contribute to the overall accountability of the governmental unit.
8. Legal and Regulatory Requirements: The budgeting process and the recording of the budget are
often governed by local regulations, accounting standards, or legal requirements specific to
governmental units.

Answer: S12-1 (A)

Expenditure Incumbrance
Represents the actual outflow or payment of Represents a reservation or commitment of funds
funds for anticipated future expenditures
Recognized when the liability is incurred. Associated with purchase orders, contracts, or
agreements.
Reduces the available financial resources. Adjusts the available budget for the anticipated
expenditure
Represents the actual usage or consumption of Represents a reservation or commitment of funds
funds for goods, services, or other expenses. for anticipated future expenditures. Also
represents a financial obligation that is yet to be
fulfilled or result in an actual payment.
Recorded as a decrease in available financial Recorded as a budgetary control mechanism to
resources or cash balance. ensure funds are set aside for specific purposes.
Provides a clear picture of the organization's Provides visibility into the organization's
financial transactions and resource utilization. anticipated future financial commitments.

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 Answer: S12-1 (B)

Revenue refers to the actual inflow of funds received by an organization, reflecting the income earned
from its activities., on the other hand,

Estimated revenue represents the projected or anticipated future income used for budgeting and
planning purposes.

Revenue is based on actual transactions, while estimated revenue relies on forecasts and projections.

Revenue Estimated Revenue

Revenue refers to the actual inflow of funds or Estimated revenue, also known as anticipated
income received by an organization. revenue or budgeted revenue, is a projection or
estimation of future income.
Revenue is recognized when it is earned or Estimated revenue is used during the budgeting
realized, typically when goods are delivered, process to estimate the financial resources that
services are performed, or contractual obligations are anticipated to be generated.
are fulfilled.
It represents the proceeds from the sale of goods, It represents the expected inflow of funds based
provision of services, or other income-generating on forecasts, historical trends, or other factors
activities.
Once revenue is recorded, it increases the Estimated revenue is subject to change as actual
organization's available financial resources. financial results may differ from initial
projections.

Answer: S12-1 (C)

The reserve for incumbrance is a portion of funds set aside within a budget to cover anticipated
future expenditures, providing budgetary control. Incumbrance represents the commitment or
obligation to make future expenditures and helps track and control budgeted funds earmarked for
specific purposes.

Reserve for Incumbrance Incumbrance

Reserve for incumbrance is a portion of funds set Incumbrance represents a commitment or
aside within a budget to cover anticipated future obligation to make future expenditures for goods,
expenditures. services, or contractual obligations.
It represents a portion of the budget that is It is a record or encumbrance created in the
specifically allocated to fulfill future financialfinancial system when a purchase order or contract
commitments. is initiated.
The reserve for incumbrance helps ensure that Incumbrance serves as a means to reserve a portion
sufficient funds are available to cover expected of the budget specifically for anticipated future
obligations when they arise. expenditures.
It acts as a precautionary measure to avoid It helps track and control budgeted funds that have
overspending and helps with budgetary control. been earmarked for specific purposes but have not
yet resulted in an actual payment or expenditure.
The reserve for incumbrance is an internal Once the actual expenditure is recorded, the
accounting mechanism that adjusts the available incumbrance is typically eliminated or reduced,
budget by reducing the amount available for other adjusting the available budget accordingly.
purposes.

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Answer: S12-1 (D)

Reserve for Incumbrance is a portion of funds set aside within a budget to cover anticipated future
expenditures, while

Fund Balance represents the net financial position of a fund after deducting liabilities and expenses.

Reserve for Incumbrance Fund Balance

Reserve for Incumbrance is a portion of funds that Fund Balance refers to the residual amount of funds
is set aside within a budget to cover anticipated remaining in a specific fund after all liabilities and
future expenditures. expenses have been deducted from the fund's
assets.
It represents a reservation of funds specifically It represents the net financial position or equity of a
earmarked to fulfill future financial obligations or fund at a given point in time.
commitments.
The purpose of the reserve for incumbrance is to Fund balance reflects the difference between a
ensure that sufficient funds are available to cover fund's assets (such as cash, investments, and
expected expenditures when they occur. receivables) and its liabilities (such as payables and
obligations).
It helps with budgetary control by preventing It represents the accumulated surplus or deficit of a
overspending and ensuring funds are allocated for fund over time.
specific purposes.
The reserve for incumbrance is typically a Fund balance is an indicator of a fund's financial
temporary holding of funds until the corresponding health and its ability to meet future obligations.
expenditure is recorded.

Answer: S12-3

Yes, there is a necessity for a governmental unit to use the same expenditure classification systems in its
general accounting as in its budget. Here's why:

A. Consistency: Using the same expenditure classification systems ensures consistency and
coherence between the budget and general accounting. It allows for seamless tracking and
reporting of financial information throughout the budgeting and accounting processes.
B. Budget Control: The expenditure classification systems in the budget help establish spending
limits and controls. By aligning these systems with general accounting, the governmental unit can
effectively monitor and manage expenditures, ensuring adherence to the budgeted amounts.
C. Financial Reporting: Consistency in expenditure classification facilitates accurate financial
reporting. It allows for easy comparison between budgeted amounts and actual expenditures,
enabling the identification of variances and informing decision-making processes.
D. Transparency and Accountability: Aligning expenditure classification systems between the
budget and general accounting promotes transparency and accountability. It provides a clear and
standardized framework for tracking and reporting financial transactions, making it easier to
understand and analyze the use of public funds.
E. Compliance and Audit: Utilizing the same expenditure classification systems ensures compliance
with accounting standards, regulations, and legal requirements. It facilitates the audit process, as
auditors can easily trace and verify financial transactions across the budget and accounting
systems.

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By using consistent expenditure classification systems, a governmental unit can enhance financial
management, promote transparency, facilitate budget control, and ensure compliance with accounting
principles and regulations.

Question LIST (2023) Given By Sir In Class And In course Exam

(C-1) Accounting and Reporting for Government and Non-Profit Organizations

(C-2) Governmental Accounting and Financial Reporting

SET-1
5. What is meant by government accounting?
6. What are the objectives of government accounting?
7. Distinguish between government accounting and commercial accounting.
8. State the nature of govt. entities.

SET-2

5. Define non-profit organization. What are the characteristics of non-profit organization?

6. Compare the main financial statements of a non-profit organization with profit
organization.
7. Differentiate between non-profit organizations with profit organization.
8. Explain how general purpose govt. differ from special purpose govt. with few example of
each type of govt.

SET-3

4. Discuss in details the characteristics and weakness of governmental accounting system of

Bangladesh .
5. Write the features of integrated accounting system followed by the nationalized industries
in Bangladesh.
6. How would you include integrated accounting system?

(C-3) General Funds and Special Revenue Funds:

(C-4) Capital Project Funds and General Fixed Assets Account

(C-5) Debt Service Fund and General Long Term Debt Account:

(C-6) Special assessment fund

(C-7) Internal service funds and enterprise fund:

(C-8) Fiduciary fund:

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SET-4

4. What is fund accounting?/ What are fund accounting systems?

5. What are the characteristics of fund accounting?
6. Why are financial activities of governmental organization managed through different
types of funds? Explain.

SET-5

4. Why govt. accounting is called fund accounting?

5. "A fund has both legal and accounting entity." Explain
6. The operation of general fund is guided by budget, do you agree? If so,
show your argument.

SET-6

5. What is general fund? What are the benefits of establishing general fund?/ What are the
advantages of general fund?
6. What are the characteristics of general fund?
7. Who are the customers of internal service fund?
8. Distinguish between permanent funds and debt service funds?

SET-7

5. What is Capital Project fund? What are the accounting characteristics of Capital project
fund?
6. Differentiate between capital project fund & Capital improvement fund?
7. What is enterprise find? What are the characteristics of enterprise fund?
8. “Govt. fund expenditure should be recognized in the accounting period in which the fund
liability occurs” Explain.

SET-8

6. What is internal service fund?

7. What are the advantages of establishing internal servicing fund?
8. What kinds of activities are accounted for an internal service fund?
9. What are the alternative methods of dissolving an internal service fund?
10. Which factor should be considered in choosing the appropriate method?

SET-9

5. Explain the distinction between agency fund and trust fund?

6. Why are fiduciary fund used by governmental units?
7. Why do agency funds have no fund equity?

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 8. Is it Possible for a permanent agency fund to have no assets and liabilities at the end of
fiscal year?

(C-9) Budget for govt. resource management:

SET-10

5. What is the modern concept of budget?

6. What should be the merits and demerits if Bangladesh government go after deficit
budget?
7. Distinguish between balanced budget and unbalanced budget.
8. Do you think that deficit financing is suitable for economic development of
Bangladesh? If so, show your arguments.

SET-11

4. Describe the steps in preparing the government's budget in Bangladesh.

5. “Because budgetary accounts are used by governmental units, their financial
statements can never be said to be in accord with GAAP.” -comment.
6. “Government fund’s expenditure should be recognized in the accounting period in which
the fund liabilities occur.” -is this a statement true or false? Explain your concern.

SET-12

1.Describe when and how a governmental unit records a budget and causes it out.

2.Distinguish between :

 Expenditure and encumbrance.

 Revenue and estimated revenue.
 Reserve for encumbrance and encumbrance.
 Reserve for encumbrance and fund balance.

3.Is there any necessity for a governmental unit to use the same expenditure classification
systems in its general accounting as in its budget.

Alhamdulillah
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