namibia UniVERSITY OF SCIEnCE AnD TECHnOLOGY

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1 FACULTY OF namibia UniVERSITY OF SCIEnCE AnD TECHnOLOGY SCIENCES MANAGEMENT DEPARTMENT OF MANAGEMENT QUALIFICATION: BACHELOR OF PUBLIC MANAGEMENT QUALIFICATION CODE: 24BPMA LEVEL: 7 COURSE CODE: PSA712S COURSE NAME: PUBLIC SECTOR ACCOUNTING SESSION: NOVEMBER 2016 PAPER: THEORY & PRACTICAL DURATION: 3 HOURS MARKS: 100 FIRST OPPORTUNITY EXAMINATION PAPER EXAMINER(S) MRS. MICHELLE DAUSAS MODERATOR: MR. BINIAM MEBRAHTU GHIRMATSION INSTRUCTIONS 1. Answer ALL the questions. 2. Write clearly and neatly. 3. Number the answers clearly. PERMISSIBLE MATERIALS 1. Examination paper. 2. Examination script. THIS QUESTION PAPER CONSISTS OF 5 PAGES (Including this front page) 1

2 Question 1 {10Marks) Choose only one (1) correct answer from the below: 1. Which of the following would be classified as the objective of Public Sector Accounting? (i) (ii) (iii) Ascertaining the propriety of transactions and their conformity with established rules, giving evidence of financial accountability and serving as a basis for planning, controlling, decision making and appraisal of performance. Evaluating the economy, efficiency and effectiveness with which resources are managed. Finding out how capital expenditure is financed. (i) only (ii) only (i) and (ii) only (iii) only (il (ii) and (iii) 2. A basis under which financial transactions are recorded only when cash is received or paid is known as Modified Cash Basis Modified Accrual Basis Cash Basis Accrual Basis Commitment Basis 3. The coordinated actions which have to be taken to ensure that funds available are adequately controlled and effective utilised are known as Revenue Control Cash Control Expenditure Control Payment Control Budgetary Control 4. Difference between the balance in the cash book and that ofthe bank statement may arise due to (i) (ii) (iii) Wrong postings on the cash book Standing order given to the bank for payment of insurance premium Bank charges and direct lodgements (i) only (ii) only (i) and (ii) (ii) and (iii) (il (ii) and (iii) 5. Which one of the following is NOT true of a Cash Budget? It shows the funds generated and how they have been applied. It assists in determining the amount of cash available to pay creditors. It helps to determine what to invest in marketable securities. It monitors when the establishment is likely to be short of cash. It confirms the availability of liquid resources for capital projects. 2

3 6. One of the following is NOT a method of preparing a public sector organisation's annual budgets? Line Item Method Traditional Method Incremental Method Rolling Plan System Planning, Programming and Budgetary System 7. The following are main objectives of expenditure control, except To prevent excess expenditure. To curb unauthorised expenditure. To curb fraud. To ensure that staff welfare issues are met. To ensure judicious and effective use of public funds. 8. An audit which checks the relevance and adequacy of documents that support a transaction is called Verification Audit Management Audit Final Audit Vouching Audit Interim Audit 9. Which of the following financial statements, is normally not prepared by a not-for-profit public e nte rp rise? Trading, Profit or Loss Accounts Income and Expenditure Accounts Cash Flow Statement Value-Added Statement Balance Sheet 10. Which one of the following is NOT the cause of Domestic Debt? Financing religious activities in Namibia Financing ever rising Government expenditure Financing Governments Budget Deficit Increasing Socio-Economic responsibilities Sharp decline in government revenue from SACU 3

4 Question 2 The following information has been extracted from the books of the Electricity Control Board, for the year ending 31 March, 2016: Accumulated depreciation, 01/04/2015 Sale of Electricity Purchase of Electricity Meter reading, billing and collection of electricity Fixed Assets Expenditure Debtors for electricity consumption read in the year and other sales Training and welfare Stock and work in progress Rents, Rates and Insurance Electricity Estimated unread consumption Administration and General Expenses Electricity Council Grant Preparation of Electricity Council's Expenses Bank Balance and Cash Depreciation of the year Hire purchase and deferred payment instalments due to ECB Interest and Financing Expenses Creditors and accrued liabilities Profits on contracting and sale of appliance poles Reserves Rental of Meters Application Distribution costs Customer services N$' , ,392 95,784 1,624 84,102 12, ,234 2,126 7,222 1A76 21, ,284 3,634 2,672 2A34 13, , A76 1,810 You are further informed that depreciation for the year ending 31 March 2016 was N$ Required: You are required to prepare the vertical form ofthe Revenue Account and Balance Sheet ofthe Electricity Control Board, for the year ended 31 March Question 3 The cash book of Omaruru Town Council has a credit balance of N$21,000 on 30 June The bank statement showed a debit balance of N$56AOO. An investigation into the difference in figures reveals the following information: The bank had paid N$40,000 on 29 June by way of standing order. A cheque for N$103JOO sent to the supplier on 29 June 2016, was not paid by the bank until 6 July A cheque valued at N$168,000, paid into the back on 28 June 2016 was not credited until 3 July On 27 June 2016, a cheque for N$11AOO received from an insurance company was posted in the Cash Book as N$71AOO. N$130,000 drawn from the deposit account had been shown in the Cash Book withdrawal from the current account. Bank charges of N$1,100 shown in the bank statement had not been entered in the Cash Book. 4

5 You are required to: a) Prepare an Adjusted Cash Book of the Omaruru Town Council for the month ending 30 June {8 Marks) b) Prepare a statement reconciling the amended balance with the one shown on the bank statement. {5 Marks) 1 Mark for presentation of each statement {2 Marks) Question 4 (a) "Without the profit motive there is an inevitable lack of budget motive". Do you agree? Discuss. {10 Marks) (b) Explain the administrative and accounting controls used to achieve the budgeted level of expenditure by the Government Ministries. (4 Marks) (c) Define a 'Line-item budget. {1 Mark) Question 5 (22 Marks} The independence of Internal Audit in a public sector organisation is considered to be essential to its effectiveness. (a) Define internal audit and internal controls, and explain their roles and objectives in a public sector organisation. {10 Marks) (b) What 3 factors influence the size and organisation of an internal audit section in a Public Sector organisation? (3 Marks) (c) Explain what is meant by independence in this context. {6 Marks} (d) Give examples of circumstances which might impair independence. Question 6 {23 Marks) Public sector accounting is necessary because of the central role it plays both politically and in economic terms. The public sector is composed of the following: Central Government, Local government and Parastatals. (a) Define 'Public Sector Accounting'. (b) List four (4) objectives of Public Sector Accounting. {2 Marks) {8 Marks) Accounting theory refers to the financial reporting that may be adopted by the organisation. Public sector organisations may adopt different accounting techniques; namely: 1) Budgetary accounting 2) Cash Accounting 3) Accruals Accounting 4) Commitment Accounting (encumbrances) 5) Fund Accounting. (c) Define each of these accounting theories. 1) Budgetary accounting 2) Cash Accounting 3) Accruals Accounting 4) Commitment Accounting (encumbrances) 5) Fund Accounting {13 Marks) (2 Marks) {2 Marks) END OF QUESTION PAPER 5