Government Accounting System || Development of Government Accounting System

Government Accounting System || Development of Government Accounting System

Government Accounting System

The accounting system followed by government offices to keep the record of all the financial transaction is known as government accounting system. It is basically related to record the revenue (incomes) and expenditures of ministries, departments, operating level offices and other legal bodies of the government.

Difference between Government Accounting and Commercial Accounting:

S.No	Government Accounting	Commercial Accounting
1	It is used by government offices.	It is used by private or public business organizations.
2	It is based on the government rules and regulations.	It is fully based on the generally accepted accounting principles (GAAP).
3	It is control by budget.	It is not control by budget.
4	It is audited by the office of auditor general.	It is audited by the professional auditors.
5	Accounts are maintained under budget head numbers.	No budget heads are classified under this accounting.

Development of Government Accounting System

Government accounting in Nepal can be traced back to the Lichhavi period. It was first introduced in Nepal in Lichhavi period to record the revenues and expenditure of the government. In Lichhavi period, there was a certain form of accounting to record financial transactions. In this period government revenues were collected from trust, tax, and custom duty and expenditures were made for war, renovation and construction of temples. When the trade and industry further developed in the Malla period, the sources of government revenue were increased. The revenues were collected from trust, tax, custom and trade. The expenditures were made for war, renovation and construction of temples. The accounting system remained in the same state as in the Lichhavi period. When the number of financial transactions increased in Shah Period, it was necessary to originate the systematic accounting system. As a result, in 1871 B.S, a book called Laldhadda was introduced to record revenues and administrative expenses of the government. In 1879, another book of accounts was introduced for recording details about land and its revenues. These two books of accounts were the important steps in the history of accounting in Nepal. After a long gap, an office Kitabkhana was established in 1925 B.S. for recording the salary paid to the employees of government offices, which is still in practice. In 1936 B.S, an important contribution made by Kharidar Gunawanta, a senior professional who propounded Syaha Sresta Pranali which was used to present a real picture of government revenues and expenditures. After the restoration of democracy in 2007 B.S., the government became more responsible towards the people and financial administration. As a result, the budgeting system was started in 2008 B.S. Under the constitution of 2015 B. S. of Nepal, on 2016 Ashadh 16, the Auditor General was appointed as the constitutional body. In Nepalese context, in the past, there were no many financial transactions and government was not accountable towards the people to show the position of public funds.Government accounting in Nepal can be traced back to the Lichhavi period. It was first introduced in Nepal in Lichhavi period to record the revenues and expenditure of the government. In Lichhavi period, there was a certain form of accounting to record financial transactions. In this period government revenues were collected from trust, tax, and custom duty and expenditures were made for war, renovation and construction of temples. When the trade and industry further developed in the Malla period, the sources of government revenue were increased. The revenues were collected from trust, tax, custom and trade. The expenditures were made for war, renovation and construction of temples. The accounting system remained in the same state as in the Lichhavi period. When the number of financial transactions increased in Shah Period, it was necessary to originate the systematic accounting system. As a result, in 1871 B.S, a book called Laldhadda was introduced to record revenues and administrative expenses of the government. In 1879, another book of accounts was introduced for recording details about land and its revenues. These two books of accounts were the important steps in the history of accounting in Nepal.

After a long gap, an office Kitabkhana was established in 1925 B.S. for recording the salary paid to the employees of government of offices, which is still in practice. In 1936 B.S, an important contribution made by Kharidar Gunawanta, a senior professional who propounded Syaha Sresta Pranali which was used to present a real picture of government revenues and expenditures.After the restoration of democracy in 2007 B.S., the government became more responsible towards the people and financial administration. As a result, the budgeting system was started in 2008 B.S. Under the constitution of 2015 B. S. of Nepal, on 2016 Ashadh 16, the Auditor General was appointed as a constitutional body. The main objective of appointment of the Auditor General was to maintain systematic accounting and avoid frauds and misappropriation of government fund. To maintain the uniformity in financial administration Procedural rule for government fund expenditure 2016 was passed and enacted in 2016 B.S. As a result, Bhuktani Sresta Pranali was introduced in 2017 B.S. Bhuktani Sresta Pranali also become unsuitable and unable to maintain the systematic record of revenues and expenditures of government offices. As a result the new accounting system based on double entry book keeping system was introduced in 2018 B.S. It has systematic and scientific system that has been followed by the government of Nepal since the fiscal year 2019/20 B.S and it is still in practice in Nepalese government offices.

Types of Accounting System used in Nepal

1.Wasil Banki Sresta Pranali: Wasil Banki Sresta Pranali was a simple statement based on single entry system, which was used to record revenues and expenditures of government offices. It was used to record incomes in one page and expenditures in other page. The accounts were closed at the end of the fiscal year or after the completion of the job. This system was unscientific and impracticable because financial transactions were not classified and analyzed into different heads.

2.Syaha Sresta Pranali: In the process of historical development of government accounting system in Nepal, Syaha Sresta Pranali was introduced by Kharidar Gunwanta in 1936 B.S. It was in practice up to 2022/023 B.S. This system was more scientific than Wasil Banki Sresta Pranali. Various types of books, which were used under Syaha Sresta Pranali, are as follows:

a. Syaha: Syaha was the primary record of financial transactions like journal voucher. It was used as the first step Syaha Sresta Pranali to record the incomes and expenditures of government offices. Syaha was prepared in a shape by providing a number of columns for incomes and expenditures. A leaf was folded into different creases according to the requirement. It was divided into two parts. The right hand side was used to record expenditures and left hand side was used to record incomes. Nagadi, Jinsi and Dharauti Syaha were used in practice.

b. Awarje: Awarje was familiar to the ledger. It was to keep the record of financial transactions in a classified manner according to the heads of income and expenditures. It facilitated to accumulate the similar nature of transactions under a single heading.

c. Dhapot: Dhapot was a final statement, which was used to report revenues and expenses in summary form to present the real position of the public fund on a given date. It was similar to the balance sheet.

4. Form Sresta Pranali: When the number of financial transactions of the government offices became voluminous, Syaha Sresta Pranali became unable to fulfill the requirement. As a result, Form Sresta Pranali was introduced in 1968 BS specially to record the land revenue of Terai and city area of Kingdom of Nepal. Different types of 51 forms were used in practice to record the financial transactions and hence it was called Form Sresta Pranali.

5. Bhuktani Sresta Pranali: Bhuktani Sresta Pranali was developed in 2017 B.S. to maintain the systematic record of revenues and expenditure of government offices according to the budget heads. It was based on double entry book keeping system, which classified the government offices into the central level and operating level for systematic recording of public.

Introduction to bank

0 Comment central bank function of bank Introduction to bank types of bank

Introduction:

What is Bank?

The term Bank is originated from the Italian word 'Banco' which means a bench. The term 'Banco' was used to refer the monetary transactions carried out by sitting on a bench.

A bank is a financial institution whose primary function is to accept idle money as deposit and provides loans to the needy people at a certain rate of interest.

The following are the different types of Bank:
a) Central Bank
b) Commercial Bank
c) Development Bank.

Q1) Define a bank and describe the functions of a bank.

Ans: A bank is a financial institution whose primary function is to accept idle money as deposit and provides loans to the needy people at a certain rate of interest. According to World Bank, " Banks are financial institutions that fund in the form of deposits repayable on demand or in short notice."

The following are the functions of Bank;

i) Acceptance of deposit: The main function of a bank is to accept deposit from the customer under different accounts such as saving account, fixed deposit account and current account.

ii) Provide Loan: A bank provides loan to people and organizations for different time periods as short-term, medium-term and long-term loan. It provides loan against security if certain assets.

iii) Deal with securities: A bank purchases and sells securities on behalf of its customers. The securities like shares and debentures are dealt through stock exchange.

iv) Creation of credit: A bank creates credit by supplying money as loan to traders and industrialists.

v) Exchange of foreign currency: A bank exchanges foreign currency under the direction of the central bank.

vi) Remittance: A bank provide the facilities of remittance. Remittance means transferring money from one place to another place.

vii) Agency Functions: A bank also offers a wide range of services to the clients. These include issue of credit cards and debit cards, remittance of money, payment of expenditure, etc.

viii) General Utility service: A bank provides some general utility services to the clients. Such services include lockers facility, travelers' cheques and letter of credit. It also provide the facility of credit instruments like, credit cards, debits cards, ATM cards to the clients.

The first bank of Nepal is Nepal Bank Limited established in 1994 B.S.

Final Account || Balance Sheet

0 Comment account10 balance sheet final account

Final Account || Balance Sheet

Items to be recorded in the Capital and Liabilities side of Balance Sheet

Capital
Net profit or loss
Drawing
Bills payable
Bank Overdraft
Creditors
Loan
Reserve fund
Outstanding expenses

Items to be recorded in the Assets side of Balance Sheet

All assets are recorded here

Current assets:
- Cash in hand
- Cash at bank
- Bills receivable
- Debtors
- Closing stock
Fixed Assets:
- Tangible fixed assets: building, machinery, furniture, motor, etc.
- Intangible fixed assets: good will, copy-right, patents, trade marks, etc

Example1: Prepare balance sheet of Sharma Guest House, Saptari on the last of Asar 2073 from the given transactions:

Parrticular	Amount	Particular	Amount
Capital	5,83,000	Net profit	1,98,000
Machinery	26,000	Cash Balance	22,000
Debtors	17,000	Bills payable	54,000
Reserve fund	65,000	Business premises	8,35,000

Solution:
Balance Sheet of Sharma Guest House As on 31st Ashar. 2073

Capital and Liabilities	Amount	Assets	Amount
Capital................ 5,83,000 Add: Net Profit.. 1,98,000	7,81,000	Machinery	26,000
Bills Payable	54,000	Cash Balance	22,000
Reserve Fund	65,000	Debtors	17,000
		Business Premises	8,35,000
	900,000		900,000

Example2: Prepare balance sheet of Mahakali Guest House Pvt. Ltd. As on Ashar 31 according to the following particulars

Particular	Amount	Particular	Amount
Capital	7,52,000	Debtors	25,000
Goodwill	13,000	Bank Overdraft	60,000
Net profit	1,38,000	Reserve fund	50,000
Furniture	4,00,000	Land and Building	5,62,000

Solution:

Balance Sheet of Sharma Guest House As on 31st Ashar. 2073

Capital and Liabilities	Amount	Assets	Amount
Capital.......... ......7,52,000 Add: Net Profit... 1,38,000	8,90,000	Debtors	25,000
Bank Overdraft	60,000	Goodwill	13,000
Reserve Fund	50,000	Furniture	4,00,000
		Land and Building	5,62,000
	10,00,000		10,00,000

Final Account || Profit and Loss Account

1 Comment account10 final account profit and loss account

Profit and Loss Account:

Profit and Loss account is prepared to ascertaining the net profit earned or net loss suffered by a business during an accounting period.

Profit and loss account is a statement which summarizes all indirect revenue expenses in one side which is compared with gross profit/revenue income in another side and net trading income of an accounting period is assessed.” - By S.Mukharjee

Objectives of preparing P/L Account

To know the net profit and net loss made by the business during the particular period.
To provide information about indirect expenses i.e. office and administrative, selling and distribution, financial expenses and other expenses and losses.
To provide information about different sources of indirect income and gain.
To provide information about the profitability of a business.

Preparation of P/L Account

All the indirect expenses and losses are recorded in debit side and all the indirect incomes and gains are recorded in Credit side of P/L Account.

Items Recorded in Debit	Items Recorded in Credit Side
Gross Loss (if any) Office and administrative expenses. Selling and distributing expenses. Financial expenses. Depreciation, repair, and maintenance expenses. Other expenses and losses	Indirect Income : (discount received, commission received, bad debt recovered, rent received, interest received, dividend received, appreciation of fixed assets, other receipts. Gross profit (if any)

Example1: The following information’s are provided to you of Himal Co. Ltd as on 31 Dec. 2017.

Particular	Amount	Particular	Amount
Salaries	18,000	Insurance Premium	8,000
Sundry expenses	4,000	Discount Received	4,000
Provision of bad debts	12,000	Commission paid	4,400
Bad debt	4,600	Rent received	2,000
Discount allowed	3,200	Advertisement	9,000
Gross profit	68,400	Depreciation	520

Solution:

Profit and Loss Account of Himal Co. Ltd Fo the year ending 31^st Dec. 2017
Particular	Amount	Particular	Amount
To Salaries	18,000	By Gross profit b/d	68,400
To Insurance premium	8,000	By Discount received	4,000
To Sundry expenses	4,000	By Rent received	2,000
To Provision for bad debts	12,000
To Commission paid	4,400
To Bad debts	4,600
To Discount allowed	3,200
To Advertisement	9,000
To Depreciation	520
To Net Profit c/d	10,680
	74,400		74,400

Example1: Prepare Profit and Loss account of Hetauda Company Pvt. Ltd. For the fiscal year end of Ashadh 2067/068 according to the following transaction.

Particular	Amount	Particular	Amount
Gross profit	1,85,000	Salary	81,000
Profit in investment	11,000	Tax	7,000
Commission received	4,000	Interest paid	20,000
Advertisement	4,000	Interest paid	20,000

Solution:

Profit and Loss Account of Hetauda Company Pvt. Ltd. Fo the fiscal year end of 31^st Ashadh. 2068
Particular	Amount	Particular	Amount
To Salary	81,000	By Gross profit b/d	1,85,000
To Tax	7,000	By profit in investment	11,000
To Interest paid	20,000	By Commission received	4,000
To Advertisement	15,000
To Audit Fees	10,00
To Net Profit	67,0000
	2,00,000		2,00,000

Final Account || Trading Account

1 Comment account10 final account trading account

Final Account || Trading Account

What is Final Account?
Final Account are the financial statements which are prepared to calculate the amount of profit earn or loss occurred during a particular time period and to give a picture of the financial position of business of that period. Those accounts and statements which are prepared at the end of a particular fiscal year with a view to determine profit and loss as well as the financial position of the organization.

Components of Final Accounts

The components of final accounts are:

Objectives and Importance of final account:

To ascertain the result of business operations in gross profit and gross loss, net profit and loss of the business during the year.
To present the true financial position of the business on a particular date.
To help in making different managerial decisions.

Trading Account

The trading account is the first step of final account prepared at the end of financial year to ascertain gross profit or gross loss.

Objectives of preparing Trading Account

To know the gross profit and gross loss made by the business during the particular period.
To provide information about opening and closing stock for making purchasing plans and policies.
To provide information about the direct expenses and factory expenses to make comparison.

Importance of Trading Account:

It helps to provide information regarding closing stock, sales and cost of goods sold.
It shows the relationship between gross profit and sales which helps to measure profitability position of the business.
It helps to provide information to prepare future plans and policies.
It helps to determine the price of goods and services.

Preparation of Trading Account It is a nominal account having debit and credit side in which all the direct expenses and manufacturing expenses are shown in debit side and all direct incomes i.e. sales and closing stock are shown in credit side of the Trading account.

Items Recorded in Debit

Items Recorded in Credit Side

Opening Stock
Purchase and Purchase Return
Direct Expenses: Direct expenses refers to the expenses which are incurred from the stage of purchase till the stock of making goods in sale able condition. Eg: Freight inward, carriages on purchase, import duty, Octrai duty, Transportation cost, cleaning charge, wages, fuel and motive power expenses, primary packing expenses, factory expenses, consumable stock, royalty, commission on purchase, etc.

Sales and Sales Return
Closing stock

(Note if closing stock appears outside of the trial balance i.e. adjustment then it is recorded in credit side of Trading A/C as well as assets side of Balance Sheet.)

Example1: From the following information prepare Trading Account for the year ending on 31st Chaitra 2069.

Particular	Amount	Particular	Amount
Opening Stock	75,000	Sales	6,30,000
Return outwards	5,000	Wages	2,000
Carriage inwards	1,000	Purchases	5,25,000
Return Inwards	10,000	Closing stock	42,000

Solution:

Trading Account of ABC Fo the year ending 31^st Chaitra 2069 Dr. Cr.
Particular	Amount	Particular	Amount
To Opening Stock	75,000	By Sales ................. 6,30,000 Less: Return Inwards: 10,000	6,20,000
To Purchase ............ 5,25,000 Less: Return outwards: 5,000	5,20,000	By Closing stock	42,000
To wages	2,000
To Carriage inwards	1,000
To gross profit	64,000
	6,62,000		6,62,000

Trial Balance

0 Comment account10 trial balance

Trial Balance

A trial balance is a statement of debit and credit balance of the ledger accounts which is prepared in order to prove the arithmetical accuracy of the books of account. It is prepared after the preparation Journal Entry and posting them into ledger account. It is also called the summary of assets, capitals, liabilities, expenses, income, etc. drawn from the ledger account.

Objectives of preparing a trial balance.

To check arithmetical accuracy of ledger postings.
To check whether the transactions are posted according to the dual aspect or not.
To find out the errors.
To prepare the final account.

Advantages of trial balance.

It helps to prepare final accounts.
If any error is found, it can easily be rectified.
It helps in the internal audit by supplying complete, reliable and accurate accounting information.
It proves the authenticity of the balance sheet prepared by the business on the given date.
It proves the arithmetical accuracy of accounting entries in the ledger.

Format of Trial Balance

Rules :

Debit Side	Credit Side
Assets Losses Expenses Drawing	Capital Liabilities Gain Income and Revenues

Example1. Prepare a trial balance of Gauri Shankar Store, Charikot for the fiscal year 2068/2069 from the following particulars.

Particular	Amount	Particular	Amount
Opening Stock	5,70,000	Sales	6,80,000
Purchases	3,30,000	Purchase return	1,80,000
Commission received	11,000	Creditor	1,59,000
Depreciation	20,000	Wages	1,10,000

Solution:

Trial Balance of *Gauri Shankar Store, Charikot.*As on 31st Ashad 2069
S.No	Particular	L/F	Dr. Amount (Rs)	Cr. Amount (Rs)
1	Opening Stock		5,70,000
2	Sales			6,80,000
3	Purchase		3,30,000
4	Purchase Return			1,80,000
5	Commission Received			11,000
6	Creditor			1,59,000
7	Depreciation		20,000
8	Wages		1,10,000
	Total		10,30,000	10,30,000

Example2. Prepare a trial balance of Shyam and Company for the fiscal year 2067/2068 from the following particulars.

Particular	Amount	Particular	Amount
Capital	2,40,000	Salary	40,000
Purchases	2,45,000	Interest Received	15,000
Sales	1,50,000	Maintenance expenses	60,000
Furniture	50,000	Bad Debts	10,000

Solution:

Trial Balance of *Shyam and Company,* As on 31st Ashad 2068
S.No	Particular	L/F	Dr. Amount (Rs)	Cr. Amount (Rs)
1	Capital			2,40,000
2	Salary		40,000
3	Purchase		2,45,000
4	Interest Received			15,000
5	Sales			1,50,000
6	Maintenance expenses		60,000
7	Furniture		50,000
8	Bad Debts		10,000
	Total		4,05,000	4,05,000

cheque || financial institution

0 Comment account10 cheque financial institution types of cheque

Cheque || Types of cheque:

Q1) What is cheque?
Ans: A cheque is a written instruction or an order given by the account holder to the bank to pay a certain sum of money to a person or an institution named therein or to the bearer of the cheque. Cheque is the printed form supplied to the depositors by the bank for withdrawing cash.

Q2) What are the different parties involved in cheque?
Ans: The different parties involved in cheque are;
a) Drawer (the account holder who writes the cheque)
A firm or an organization or a person having deposits in bank and who issues a cheque, is a drawer. Actually, the drawer is the depositor, who orders the bank to pay specified sum of money to the person or organization specified in the cheque.
b) Drawee (the bank on which the cheque is drawn)
Bank is a drawee because it receives the order from the customers/depositors fro making the payment of a sum of money on demand. So, the bank on which the cheque is drawn is known as drawee.
c) Payee (the party who gets the amount)
The payee is the party to whom cheque amount is paid by the bank. Generally, the name of the payee is written on the cheque and he can draw specified amount from the bank. If the name of the drawer or word "self" is written on the cheque, in such case the drawer himself becomes the payee.

Q3) Some rules of the cheque are as follows;
a) The date written on the cheque must be correct and clear. It must not exceed the expiration time specified by the bank or be post dated.
b) The name, surname and address of the payee must be written clearly.
c) The amount in words and figures must be same.
d) The account number must be correctly and clearly written on the cheque.
e) The signature of the account holder on the cheque must match up with the specimen signature.
f) The amount holder must have sufficient balance in the account.
g) Any changes made while writing the cheque must be signed by the account holder.
h) Cheque must be written in the language/s used in the bank.

Note: If the above mentioned rules or conditions are not met the bank will refuse to make payment. This is called dishonor of cheque.

Q4) What are the different types of cheque?
Ans: The following are the different types of cheque;
a) Bearer cheque:

A bearer cheque is that cheque the payment of which can be made to anybody presenting it to the bank for payment. The bank cannot be responsible if it makes payment to a wrong person. Any person finding the bearer cheque can withdraw the amount from the bank. Therefore, it is not safe type of cheque. It does not require endorsement.

b) Order cheque:
A cheque the payment of which is made only to the specified person in the cheque. The signature of person or party whose name is written in the cheque is essential for enchashment of this type cheque. He/she must put his/her signature on the back of the cheuqe. Having the signature of the person or party whose name is written in the cheque is called endorsement.

c) Cross cheque:

A cross cheque is a cheque which is prepared by following certain criteria of crossing. Simply, A cheque in which two parallel lines are drawn across it faces is called crossed cheque. Crossing on cheque is made to top left corner with or without the words like & co, Not Negotiable etc. The payment of such cheque is not made directly to the payee. It will deposited into the account of payee and payee, in turn, issues his own cheque to draw money from the bank. In fact, cross cheque is very safe and useful means of paying as well as remitting large sums from one place to another place.
Cross cheque can be classified into two types. They are discussed as follows:
i) General Crossing: If the cross cheque does not specify the name of bank to which amount is deposited, it is called general crossed cheque. The amoun tof this type of cheque can be collected by any bank where there is the account of payee. The drawee bank simply makes payment on this cheque on behalf of payee to the bank of payee.
ii) Special crossing: If a cross cheque specifies the name of payee's bank where amount can be collected, it is called special cross cheque. In this type of cheque, the name and address of payee's bank is written within the crossing line and the drawee bank only makes payment in the payee's account of specified bank mentioned in the crossing.