00:00 Hello viewers, I'm Mrs. Oyinloye, and I'm your instructor for financial accounts.

00:19 Our topic for today is public sector accounting, behavioral objectives.

00:26 At the end of the lessons, students should be able to define public sector accounting

00:31 and enumerate reasons for preparing government accounts.

00:36 Also, students should be able to list the users of government accounts

00:41 and differentiate between public sector accounts and private sector accounts.

00:47 Also, students should be able to list the sources of revenue for the 3 tiers of government.

00:53 What is public sector accounting?

00:56 Public sector accounts is the process of recording the financial transactions

01:02 involving the receipts and disbossments of government funds

01:06 in a systematic way, their analysis and interpretation.

01:12 Now let's move the key words in this case.

01:15 Like I said, public sector accounting is the process of recording the financial transactions

01:20 involving the receipts and disbossments of government funds

01:24 in a systematic way, their analysis and interpretation.

01:30 The key words here, like I said, are process of recording the financial transactions

01:35 involving the receipts and disbossments of government funds

01:40 in a systematic way.

01:42 The three words that I want us to take notes of are

01:45 one recording financial transactions of the government.

01:49 Two, disbossments, the receipts and disbossments of government funds

01:54 and three, their analysis and interpretation.

01:59 So the financial accounts and should be able to record the government transactions

02:04 two, also analyze the receipts and disbossments of such funds.

02:09 It shows a detailed recording of government revenue and expenditure.

02:15 Now when we talk of revenue and expenditure of the government,

02:18 we're talking of those income that comes into the coffers of the government

02:23 and how such income is expanded.

02:26 The public sector accounting is governed by the Constitution of the Federal Republic of Nigeria

02:32 of 1979, financial control and management acts of 1958.

02:39 Concepts used in government accounting.

02:42 Now the various government concepts used in government accounting are

02:47 the duality concepts, which is one of the concepts of accounting,

02:51 which means that we follow the double entry principle.

02:55 The materiality concepts, the going-concent concept,

02:59 periodicity concepts and the monetary concept.

03:06 Importance of government accounting.

03:09 The major reasons for preparing government accounting are as follows.

03:13 One, for decision-making process.

03:16 Every government of a country needs to make decisions on its finance.

03:22 But for such decisions to be made,

03:25 there's need to understand the income that comes into the coffers of such governments

03:30 and the expenditure.

03:32 How much income comes in?

03:34 How do these incomes come in?

03:36 And how do we expand the income that comes in?

03:39 So decisions need to be taken, such as budgets.

03:43 What are the budgets that will make?

03:45 The budgets that will be made should be based on the finance of that country.

03:51 Then it also sells as basis for controlling expenditure and revenue.

03:58 Another importance of government accounting is that

04:01 it's to show the various sources of government's revenue.

04:06 Like has been said earlier,

04:07 we want to know how much comes into the account of the government.

04:11 What are the sources of these government revenue?

04:15 Taxes, royalties and all others,

04:20 which we are going to look at later.

04:21 And then for planning purposes.

04:24 If the government of a country will plan for citizens,

04:27 if the government of a country will plan for activities of that country for that particular year

04:33 or even years to come, there's need to prepare the accounts of the governments.

04:38 Users of governments accounting.

04:42 One is the president of the country.

04:45 Remember that we said that decisions need to be made.

04:48 Planings need to be done.

04:50 And of course, the president of a country needs to be aware of what is needed to plan.

04:56 And one of those information is needed by the president,

05:00 needed by governors. Governors also need to make use of governments accounting.

05:05 They need to know.

05:06 For instance, states also receive statutory allocations from the federal government.

05:12 So they need to know what is the amount of income that comes into the hands of the federal governments.

05:18 And how much should go towards the states?

05:21 Local government chairman will also need to be aware of the accounting of the government.

05:27 Legislative hands of the government also need to be aware.

05:31 Also of assembly foreign investors, those that want to invest in the country,

05:36 they will need the records of that particular country.

05:40 How does revenue come to this government?

05:45 What are the sources of revenue?

05:47 And then how is the revenue expanded?

05:50 Apart from foreign investors, local investors are also interested in the accounts of the government.

05:56 Then the public, the general public, you and I want to know how much comes into the hands of our government.

06:02 And how the money that comes in is being expanded.

06:06 Financial institutions, both international institutions and non-financial institutions are also interested

06:15 in the accounts of the government.

06:17 Then local authorities, such as the local government also want to know

06:22 what comes into the accounts of the government.

06:25 Business of governments accounting.

06:28 We have the cash basis and a cruel basis.

06:32 What do we mean by a cash basis?

06:35 Under the cash basis, financial transactions are recorded in the books

06:39 when actual payments is made or money is received.

06:46 I want you to take notes of this.

06:48 When actual payments is made or money is received.

06:53 That means the accounts of the government is solely used on cash basis.

06:59 A record is only determined by when cash comes in and when cash goes out.

07:06 That means we don't prepare our accounts based on the fact that there are some people all in us,

07:12 such as debtors or that we are all in some people, such as creditors.

07:17 Our accounts is prepared based on amounts that comes in or amounts that goes out.

07:25 A cruel basis.

07:26 This is used by the government for status.

07:30 Now, in the case of a cruel basis, financial transactions are recorded

07:36 not when actual payments is made or cash received.

07:39 But as soon as the contract is agreed upon and sealed.

07:44 That is, income is recognized when revenue is earned.

07:49 As soon as revenue is earned, income is recognized.

07:53 Unlike the cash basis, income is recognized only when cash is received.

08:00 But for a cruel basis, income is recognized when revenue is earned.

08:05 And expenses are recorded when liability is incurred, even when they have not been paid for.

08:11 Now, let's look at the differences between government's accounting and private sector accounting.

08:18 The first thing you need to note about these two accounts are that the government sector accounting

08:24 is based on provision of services.

08:27 Remember that the government of a nation is interested majorly in providing services for citizens.

08:34 So, the accounting is prepared based on provision of services.

08:39 What are the services we are providing?

08:41 Hospitals, schools and so on.

08:44 So, those are the things you see in the records of the government.

08:47 While the private sector's accounting is based principally on profit maximization.

08:54 Secondly, government sector does not show creditors.

08:58 Remember that we said that the accounting is prepared using cash basis.

09:02 And because of it, you don't see records of creditors in the accounts of the government.

09:08 But for the private sector, it shows creditors for goods.

09:11 Thirdly, revenues are derived majorly from tax, whether it's the direct tax or indirect tax.

09:20 But for the private sector, revenues are derived from sales of goods.

09:25 Another difference is that for the government sector, cost of assets are written off in one year.

09:32 Whatever assets the government is purchasing, the cost has to be written off over a year.

09:38 But for the private sector, cost of assets are spread over the useful life of the assets.

09:44 Another difference, which we have talked about earlier,

09:50 is that governments accounting is basically on cash basis.

09:55 While private sector accounting is on a cruel basis.

10:01 The sixth difference is that government accounting is based on the constitution

10:05 of the nation.

10:07 For Nigeria, the government accounting is based on the constitution of Nigeria.

10:11 While the private sector accounting is governed by the company and allied matters decree.

10:16 And then lastly, the government's accounting.

10:21 In government's accounting reports is made to the accountant general of the federation.

10:26 While for the private sector accounting, the report to shareholders being the owners of the business.

10:33 Government revenue and expenditure.

10:38 What is government revenue?

10:44 Of course, when you hear the word revenue, what comes to your mind?

10:47 Income.

10:48 So, government revenue is the total income accruing to the government of a country.

10:55 The total income accruing to the government of a country

10:59 is what makes up the revenue of the government.

11:03 And it can be classified into two.

11:05 We have the federal government, which is a major source of government revenue.

11:12 And then, as these various eddings, direct and indirect taxes.

11:19 What are direct taxes?

11:22 Now direct taxes are taxes that are paid directly

11:26 into the co-fast of the government from the individual.

11:30 We have examples such as the personal income tax, withholding tax,

11:35 co-operation tax, capital transfer tax, capital gain tax, petroleum tax.

11:42 And then the indirect taxes are taxes that go to the ends of the government

11:46 but true other individuals.

11:49 Examples of such are sales tax, export duties, tariffs, purchase tax,

11:55 excise duties.

11:57 Now, let's look at the major difference between these two direct taxes

12:01 and indirect taxes because it's very important

12:04 that you are able to differentiate the two.

12:07 The first difference is that the direct taxes

12:10 are imposed on income and profits of individuals or organization.

12:18 For individuals, it might be its personal income

12:21 and then for organizations, it could be their company tax.

12:25 So these are direct taxes while indirect taxes are levied

12:29 on goods and services such as vats.

12:32 Secondly, while direct tax is paid directly to the government,

12:37 there's generally an intermediary for collecting

12:42 indirect taxes from the customer.

12:45 For instance, if you go to a supermarket to buy some items,

12:48 you are indirectly paying tax because vats will be removed

12:52 from those items that you are bought.

12:55 You might not know, but you are paying tax on those goods that you are bought.

12:59 Thirdly, direct taxes are imposed on a person or property

13:04 while indirect taxes are on transactions.

13:07 My name is also a source of revenue of the government.

13:13 Remember that we said that one of the major sources of revenue

13:17 for the federal government is direct and indirect taxes.

13:21 Secondly, my name is also a source of revenue

13:25 and then that is gotten from royalties, sales of crude oil,

13:29 rents on oil wells, querying licenses.

13:32 So any individual that wants to go into querying

13:36 or into sales of crude oil will need to pay my name fees

13:40 to the government. And so it's also a source of revenue to the government.

13:45 Another source of revenue is fees and licenses.

13:50 Visap fees, passport fees, court fees,

13:55 club registration fees, church and mosque registration,

13:59 company registration, ammunition licenses.

14:02 So all these are fees and licenses that we pay to the government

14:07 and it's also a source of revenue.

14:11 Investments and dividends in corporations.

14:15 The government of a country might decide to invest in organizations.

14:18 And so when this is done,

14:20 any form of investment that comes or dividends that come

14:23 through such investments forms a source of revenue for the government.

14:29 Rent on government properties such as vehicles.

14:32 The government might decide that they want to rent out some of their vehicles

14:36 and thereby get income from them.

14:38 And their revenue from armed forces,

14:41 equipment is also a source of government revenue.

14:45 The state's government's now.

14:47 Remember we are talking about the three tiers of government,

14:49 the sources of revenue.

14:50 We have talked about the federal government

14:52 and we have said the sources of revenues are

14:55 direct and indirect taxes,

14:57 mining and fees.

14:59 Now for the state governments,

15:01 what are the major sources of revenue?

15:04 One is the statutory allocation.

15:07 What do we mean by statutory allocation?

15:09 Statutory allocation is the amount that is due from the federal government

15:14 by the state government.

15:15 Now this means that the state government is expected to receive

15:19 a specific amount from the federal government to run the state.

15:24 Remember that we have three tiers of government,

15:27 the federal government, the state government and the local government.

15:31 So whatever income comes to the hands of the federal government

15:35 is not solely managed by the federal government.

15:38 It is not solely owned by the federal government.

15:40 The federal government will need to disbose the funds.

15:43 Share into three.

15:45 Part of it to be taken by the federal government itself

15:48 parts to be given to the state government

15:51 and parts to be given to the local government.

15:54 So the part that goes to the state government

15:57 and the local government is what we call statutory allocation.

16:02 And there's usually an amount of money that goes to the--

16:06 there's usually a percentage that is used in this allocation.

16:13 Another source of revenue to the state government

16:15 is investment earnings.

16:18 Investment earnings.

16:19 Just like the federal government can decide to invest in organizations,

16:23 the state government can also decide to invest.

16:26 And so they make some money or make some revenue through these earnings.

16:31 Their rent on government properties is also a source of revenue

16:35 for the state government.

16:37 Rent on government offices and vehicles.

16:40 It's also a source of revenue.

16:42 And then special grants.

16:44 Special grants can be given to states for specific purposes.

16:48 Maybe they want to build roads or build some schools.

16:51 It could be giving through the development fund.

16:55 Then personal income tax of those living in that particular state.

17:00 So that is also a source of revenue.

17:02 Just like the federal government will receive income from employees.

17:07 The state government will also receive personal income tax

17:10 from employees and those living in that particular state.

17:14 Then fees, people go to hospitals, they pay fees, schools, courts,

17:19 all those fees from sources of revenue to the state government.

17:23 And then we have licenses, motor licenses,

17:27 sales of liquids, patent, medicine, and motorcycle licenses.

17:34 The local government, this is a thought tier of government.

17:37 Now, the major sources of local government revenue are as follows.

17:41 As we have said earlier, just like the state government will receive

17:44 statutory allocation, the local government also receives statutory allocation.

17:50 Other sources of revenue to the states are special grants,

17:54 radio and television licenses.

17:58 Tenement rates are paid by owners of houses to the government.

18:04 Then fines, licenses, signposts, market stalls, and liquor licenses,

18:10 loans from states, income from road naming,

18:14 all those form revenues for the state.

18:17 Thanks for watching and Mrs. Zoonilouye.

18:21 Till next time.