Chapter 10 Solutions: Government Accounting in Nepal
Answers to the Chapter 10 exercises. Each answer is as long as its marks call for: a sentence or two for 1 mark, five clear points or a five-row table for 5 marks, and full working for numerical problems.
Group A: Very Short Answer Questions (1 Mark Each)
1. Define Government Accounting.
Government Accounting is the systematic process of recording, classifying, summarizing, reporting and auditing the receipt, allocation, release and expenditure of public funds by government ministries, departments, offices and constitutional bodies, in strict accordance with parliamentary budget appropriations and financial rules.
2. When was the New Accounting System introduced in Nepal?
The New Accounting System was formally approved by King Mahendra on 2 Chaitra 2018 BS (1962 AD) and implemented from Fiscal Year 2019/20 BS; it had been drafted by an Account Committee formed on 20 Magh 2016 BS.
3. Write the Budget Head Numbers for: (a) Remuneration, (b) Office Materials, (c) House Rent, and (d) Furniture and Fixtures.
(a) Remuneration: 21111; (b) Office Materials: 22311; (c) House Rent: 28142; (d) Furniture and Fixtures: 31123. The first three are recurrent heads and the last is a capital head.
4. What is the Treasury Single Account (TSA) System?
The Treasury Single Account (TSA) is a unified structure of government bank accounts, managed by the District Treasury Comptroller Office (DTCO), that gives a consolidated view of government cash resources. Operating offices hold no separate idle bank balances: they send a Payment Order Statement (AGF No. 204) to the DTCO, which pays the vendor or employee directly from the TSA.
5. Mention the AGF Form Numbers (New or Old) for: (a) Goswara Voucher, (b) Bank Cash Book, (c) Budget Sheet, and (d) Statement of Expenditure.
(a) Goswara Voucher: AGF No. 203 (old AGF No. 10); (b) Bank Cash Book: AGF No. 209 (old AGF No. 5); (c) Budget Sheet: AGF No. 208 (old AGF No. 8); (d) Statement of Expenditure: AGF No. 210 (old AGF No. 13).
6. What is a Budget Sheet? State its three parts.
A Budget Sheet (AGF No. 208) is a columnar ledger kept by every operating-level office to monitor the approved annual budget, budget releases and progressive expenditure under each 5-digit budget head, so that expenditure never exceeds the sanctioned budget. Its three parts are (I) Annual Appropriation / Budget Allocation, (II) Budget Release and (III) Budget Expenditure.
Group B & C: Short and Long Numerical Questions (5 / 8 Marks)
1. Differentiate between Government Accounting and Commercial Accounting on any five bases.
Government Accounting records and controls public funds for public service, while Commercial Accounting records the transactions of a business run for profit. They differ as follows:
| Basis of Difference | Government Accounting | Commercial Accounting |
|---|---|---|
| Primary objective | To record and control the inflow and outflow of public funds within approved budget limits, for public administration, development and social welfare (non-profit motive) | To find the periodic Net Profit or Loss and the true financial position (Balance Sheet) of the business |
| Budgetary control | Strictly controlled by the government budget passed by Parliament under Recurrent, Capital and Financing heads; no office can spend beyond the approved limit of a budget head | Guided by flexible budgets the business sets for itself, with no statutory parliamentary restriction |
| Source of funds | Taxes, customs, non-tax revenue, foreign grants and public debt | Owner’s capital, sale of goods and services, and commercial loans |
| Prescribed forms | Uses the mandatory AGF forms approved by the Office of the Auditor General (OAG), such as the Goswara Voucher (AGF No. 203) and Bank Cash Book (AGF No. 209), with expenditure recorded under 5-digit budget head codes | Uses standard accounting books designed to suit the entity’s needs under NAS/NFRS |
| Auditing authority | Internal audit by the DTCO and final constitutional audit by the Office of the Auditor General (OAG) | Audited by an independent practicing Chartered Accountant or Registered Auditor appointed by the owners |
They also differ in the classification of accounts: government accounts are divided into Central Level Accounting and Operating Level Accounting, while a business keeps one set of accounts without such a division.
2. Explain the main features and objectives of the New Government Accounting System of Nepal.
The New Accounting System is the double-entry government accounting system drafted by an Account Committee formed on 20 Magh 2016 BS, approved by King Mahendra on 2 Chaitra 2018 BS (1962 AD) and implemented from Fiscal Year 2019/20 BS. It has since been modernized by the Financial Comptroller General Office (FCGO), with the approval of the Office of the Auditor General (OAG), through CGAS (Computerized Government Accounting System), SUTRA (Sub-national Treasury Regulatory Application) and the revised 200-series AGF forms.
Main features:
- Double entry basis: Every transaction has an equal debit and credit. It is first recorded with Dr. and Cr. in the Goswara Voucher (AGF No. 203), the book of original entry, and then posted to the Bank Cash Book (AGF No. 209), which keeps the accounts complete and arithmetically accurate.
- Budgetary control: All expenditure is governed by the annual budget passed by Parliament. Each payment is recorded under its 5-digit budget head, such as 21111 for Remuneration or 22311 for Office Materials, and the Budget Sheet (AGF No. 208) tracks the budget, release and expenditure of each head, so no office can spend beyond the approved limit.
- Banking transactions through the TSA: Receipts and payments are routed through the Treasury Single Account. An operating office holds no idle bank balance of its own; it sends a Payment Order Statement (AGF No. 204) to the DTCO, which checks the budget limit and pays the vendor or employee directly from the TSA.
- Prescribed forms and computerized systems: Every office keeps its accounts in the AGF forms approved by the OAG, now through CGAS and SUTRA. The accounts of all offices are therefore uniform, and those of operating level offices can be compiled at the central level.
- Statutory auditing: The accounts are audited internally by the District Treasury Comptroller Office (DTCO) and finally by the Office of the Auditor General (OAG), the constitutional auditor, which makes every office accountable for the public money it spends.
The system is run for public service, not profit, and divides accounts into Central Level and Operating Level Accounting.
Objectives:
- To record all transactions systematically: All government revenues and expenditures are recorded under the prescribed budget heads, so every rupee received or spent can be traced to its head.
- To prevent misuse and over-expenditure: Budget control and the TSA guard against misuse, embezzlement and spending beyond the budget limits approved by Parliament.
- To provide data for the next budget: Head-wise records of revenue and expenditure give reliable financial data for preparing the next fiscal year’s national budget.
- To make auditing smooth: Uniform forms and complete vouchers make the internal audit by the DTCO and the final constitutional audit by the OAG easy and reliable.
- To give regular reports: Operating offices prepare a monthly Statement of Expenditure (AGF No. 210) for the central office and the DTCO, showing expenditure, the remaining budget and uncleared advances, so the progress of spending can be monitored.
3. Differentiate between Central Level Accounting and Operating Level Accounting.
Government accounts in Nepal are kept at two levels: the central level, where budgets are allocated and released, and the operating level, where the released budget is actually spent. They differ as follows:
| Basis of Difference | Central Level Accounting | Operating Level Accounting |
|---|---|---|
| Meaning and offices | Maintained by ministries, departments, constitutional bodies and FCGO/DTCO, which allocate and release budgets | Maintained by regional, district and field-level subordinate offices, such as District Education Office, Kathmandu, which spend the released budget on programs and projects |
| Core function | Budget appropriation, authorization, release of funds through the TSA, and supervision of subordinate offices | Carrying out public works and services, paying bills, and granting and clearing advances |
| Forms maintained | Central Journal Voucher, Subsidiary Ledger of Budget Release and Consolidated Financial Statements | Goswara Voucher (AGF No. 203), Budget Sheet (AGF No. 208), Bank Cash Book (AGF No. 209), Statement of Expenditure (AGF No. 210) and Advance Statement (AGF No. 211) |
| Reporting | Receives the monthly reports of its subordinate offices and combines them into consolidated financial statements | Prepares the monthly Statement of Expenditure (AGF No. 210) and submits it to the central office (ministry or department) and the DTCO |
| Position in the hierarchy | Superior office that releases the budget, supervises and directs the offices under it | Subordinate office that spends within the budget released to it and is accountable to its central office |
For example, a ministry or department releases budget to the District Education Office, Kathmandu and keeps central level accounts of that release, while the District Education Office spends the budget, records each payment in Goswara Vouchers and the Bank Cash Book, and reports every month through the Statement of Expenditure (AGF No. 210).