This document discusses accounting in the public sector. It covers topics such as financial reporting, managing revenue and expenditures, accounting standards, and accounting systems. Specifically, it discusses: - The content of financial reporting in the public sector, which provides information about the present condition, past financial performance, and future tendencies. - The accounting model, which shows assets, liabilities, and equity over time and how revenue, expenses, and cash flows impact these categories. - The main accounting standards used in public sector accounting, including national standards like GAAP and international standards like IPSAS. - The key difference between cash accounting, which recognizes events based on cash transactions, and accrual accounting, which recognizes events

1. Accounting in the public sector
Dr Alberto Asquer

2. Financial reporting in the public sector
Managing revenue
Managing expenditures
Managing cash flow
Managing capital revenue
Managing capital expenditures
Medium-term
budgeting
Short-term
budgeting
Strategic
planning
Programming Financial
reporting
Auditing
Compliance auditing
Performance auditing

3. Financial reporting in the public sector
Content of financial reporting: information about
time
Present
condition
Past financial
performance
Future
tendencies

4. Financial reporting in the public sector
Content of financial reporting: information about
time
Present
condition

5. Assets are ‘Rights or other access to future economic
benefits controlled by an entity as a result of past
transactions or events’ (Weetman, 2011). Examples include
a building or motor vehicle.
Liabilities are ‘Obligations of an entity to transfer economic
benefits as a result of past transactions or events’
(Weetman, 2011). Examples include a bank overdraft or
loan.
Net assets or equity is the residual interest in the assets of
the entity after deducing all its liabilities.
The accounting model

6. The accounting model
Assets
Liabilities
Equity
time
At a given date in time
Debts
Loans
Cash
Property
Shares and
securities
Inventory

7. The accounting model
Assets
Liabilities
Equity
time
At a given date in time
Debts
Loans
Cash
Property
Shares and
securities
Inventory

8. Current
assets
The accounting model
Long-term
assets
Liabilities
Equity
time
At a given date in time

9. Current
assets
The accounting model
Long-term
assets
time
At a given date in time
Current
liabilities
Long-term
liabilities
Equity

10. Current
assets
The accounting model
Current
liabilities
Cash or what is
expected to convert into
cash in the short term
Liabilities that are expected
to convert into payments in
the short term

11. Current
assets
The accounting model
Current
liabilities
Cash or what is
expected to convert into
cash in the short term
Liabilities that are expected
to convert into payments in
the short term
Current assets – Current liabilities =
Net Working Capital
It is indicative of the liquidity of an entity
(capacity to fulfil payments in the future short term)

12. Current
assets
The accounting model
Current
liabilities
Cash or what is
expected to convert into
cash in the short term
Liabilities that are expected
to convert into payments in
the short term
Current assets – Current liabilities =
Net Working Capital
It is indicative of the liquidity of an entity
(capacity to fulfil payments in the future short term)
Future
tendencies

13. The accounting model
time
Present
condition
Past financial
performance

14. The accounting model
time
from … … to
Stream of revenue
Stream of expenses

15. The accounting model
time
from … … to
Stream of revenue
Stream of expenses
Revenue – expenses = (net) income
(profit or loss) (surplus or deficit)

16. The accounting model
time
from … … to
Stream of revenue
Stream of expenses
Equity
Equity
A profit (or surplus)

17. The accounting model
time
from … … to
Stream of revenue
Stream of expenses
Cash inflows
(receipts)
Cash outflows
(payments)

18. The accounting model
time
from … … to
Cash inflows
(receipts)
Cash outflows
(payments)
Cash receipts – cash payments = (net) cash flow

19. The accounting model
time
from … … to
Cash inflows
(receipts)
Cash outflows
(payments)
Current
assets
Current
assets
A positive cash flow

20. Accounting standards
• National standards
• e.g., US generally accepted accounting principles or
GAAP (by Financial Accounting Standards Board)
• International standards
• International Accounting Standards (IAS) (by
International Accounting Standard Committee from
1973 to 2001)
• International Financial Reporting Standards (IFRS) (by
International Accounting Standard Board from 2001)
• International Public Sector Accounting Standards
(IPSAS) (by the IPSAS Board from 2006)

21. Cash and accrual accounting
A main difference
• Cash accounting: recognition, recording and reporting of
events is based on when cash is received or payments
are made (cash transactions)
• Accrual accounting: events are recognised when they
occur, and they are recorded and reported in the period
when they take place

22. Accounting systems in the public sector
https://www.ifac.org/system/files/Accounting-Basis-by-Country.pdf

23. The end