- 10 Marks
PSAF – May 2021 – L2 – Q2b – International Public Sector Accounting Standards (IPSAS)
Explain differences between accrual and cash accounting, justify IPSAS adoption, and describe commitment accounting benefits.
Question
You have received an official memo from your Permanent Secretary, which reads:
Director of Account and Finance: Hope you are doing well. We have just closed from a workshop organised by the Ministry of Finance on public finance management not long ago, and the discussion was all about the adoption of IPSAS accrual accounting in the public sector. It was emphasised that migration from IPSAS Cash Basis to IPSAS Accrual Basis is necessary to improve financial reporting and transparency in the public sector. You know I have little knowledge in accounting, so I was completely lost in the discussions and I wished you had attended the workshop with me.
Another issue discussed was commitment accounting. We were made to understand that commitment accounting strengthens public finance management and therefore all Ministries, Departments and Agencies (MDAs) must ensure that every expenditure is committed in accordance with the appropriation prior to spending.
Please could you help me with some information on these issues?
Required:
Explain to the Permanent Secretary:
i. THREE differences between accrual accounting and cash accounting. (3 Marks)
ii. THREE justifications for adopting IPSAS accrual accounting in the public sector. (3 Marks)
iii. The term “commitment accounting” and illustrate THREE ways it could strengthen public financial management. (4 Marks)
Find Related Questions by Tags, levels, etc.
- Tags: Accrual Basis, Cash Basis, Financial Transparency, IPSAS, Public Finance Management
- Level: Level 2
- Topic: International public sector accounting standards
- Series: MAY 2021