i) Motor vehicle donated to the entity
Under cash basis no cash is received and therefore no recognition will be made in the Statement of cash receipt and cash payment for the period. No information to reflect the operational capacity of the entity (Motor vehicle will not be reflected in the financial information).
Contrary, under the accrual basis of accounting the policy will be to recognize the donation in kind as revenue for the reporting period and disclose the vehicle at its market value. In addition, the cost of service will reflect the use of the vehicle (depreciation) within the reporting period and reporting the operational capacity at carrying amount.

ii) Revenue earned but not received by the entity
Under cash basis, there will be no disclosed of the revenue in the statement of cash receipt and cash payment since such revenues were not received. However, information on the revenue receivable may be disclosed in the notes to the accounts. No allowance will be made for uncollectible revenues.

Under accrual basis, the accounting policy will be to recognize the revenue yet to be received as revenue for the period and treat the revenue receivable in the statement of financial position as asset. In addition, appropriate allowance will be made for uncollectible revenues to reflect the cost of service. No disclosure is required under

iii) Furniture acquired in the current year
Cash basis accounting policy is to charge the whole amount of the furniture to cost of service (payments) for the year without disclosing the value of the asset in the operational capacity. Consequently, no depreciation policy is required.

Under accrual basis, the furniture will be capitalized and depreciated over its useful life so as to fairly reflect the cost of service of the entity. The depreciation policy will be disclosed in the notes to the accounts, a part of accounting policies.

iv) Electricity consumed for the year but not paid to PDS
Electricity unpaid at the end of the year will not be included in the statement of cash receipt and cash payments for the period. No liability will be reflected in the financing capacity of the entity. Notwithstanding, the liability resulting from the electricity may be reported in the notes of accounts if it is material.

However, under the accrual accounting policy, the electricity expense will be reflected in the cost of service and the financial capacity will also indicate the liability. No disclosure is required in the notes of accounts

• Commitment accounting is used solely in relation to expenditure; not revenue.
• It is an alternative accounting bases which is more theoretical; it is less widely adopted in practice compared with cash and accrual accounting.
• The entries are complicated when orders are cancelled or when there is amendment of the content or an order to illustrate how the entries are made to let us assume a manager orders 50 bags of cement is GHS8.80.
• To avoid returning uncommitted resources back to government’s general fund, rush orders for inappropriate jobs or services can be made to commit unused cash balances.

• It recognises the existence of the transaction in terms of service to be given or received but not the inflow and outflow of cash. It is a realistic and practical concept because it takes both cash and credit transactions into consideration; debtors and creditors are found in the accounting books because of the credit terms.
• There is distinction between capital expenditure and revenue expenditure. This allows for the matching of output activity and programme with cost incurred, thus performance measurement. The cost of fixed asset which is depreciated is what is expensed and not the total cost as applies under the cash accounting.
• This technique allows for the preparation of the final accounts in the form of preparation of the operating statement and balance sheet. There is full disclosure of the resources on the land and the actual use of the resources as well as outstanding liabilities.
• With accrual accounting receivables and payables are recognised.
• Under accrual accounting, revenues are recognised when they are earned and expenditure recognised when they are incurred.

• Cash inflow and cash outflow is the only basis for recording transactions in the books of account. The cash book is the main book of document thereafter posting is made to ledger.
• Credit transactions which result in debtors and creditors are not recorded, debtors and creditors accounts are therefore not kept.
• Both revenue and capital income and revenue and capital expenditure are treated in the books as revenue income or revenue expenditure. Fixed assets are not recognised under cash basis, they are written off in the year of purchase, so there is nothing like depreciation of asset.
• Cash accounting reports no surplus or deficit and no assets or liabilities. In the absence of these items found in the balance sheet, the cash accounting basis do not require the preparation of a balance sheet.

• Set up of business process, such as CoA, IFMIS and ICT.
• Change management – whether the changes are being driven from the top down, or bottom up. For example, changes driven by the top level of government may be mandatory for all entities within that government and may have fixed time frames;
• The current basis of accounting used by the entity, the capability of existing information systems, and the completeness and accuracy of existing information particularly in relation to assets and liabilities;
• Misconception between Management personnel concerning the impact of change to the budgeting basis;
• The level of political commitment to the adoption of accrual accounting and the system of government and the political environment; and
• The capacity and skills of the staff and organizations responsible for implementation of the changes.

• In accrual accounting comprehensive set of financial statement are prepared to measure financial performance, position and cash condition of the entity. However, cash accounting reports mainly on cash condition of the entity by emplacing receipt and payment information.
• Under accrual accounting, non-financial assets are capitalised and depreciated over their useful life span but under cash accounting cost of non-financial assets are written off in the year of acquisition or construction, hence no depreciation is charged.
• Under cash accounting all obligations of government are disclosure on the statement of financial position but in the cash accounting system such information is not disclosed on the financial statement until they are paid.
• Under accrual accounting allowances are permitted for receivables but no such allowances are accounted for under cash accounting.
• Under accrual accounting revenues are reported when they are earned and expenditures when incurred but under cash accounting revenues are recognised only when received and expenditures when actually paid for.

• It provides superior measure of performance in terms of cost of service, efficiency and effectiveness in service delivery.
• It promotes accountability and transparency in public financial management through increasing disclosure of all assets and liabilities.
• It provides comprehensive financial information that support decision making and control.
• It ensures general improvement in the quality of financial reporting in the public sector.

Commitment accounting is a technique of accounting in which expenditures are recorded when decision is made by management to spend on an activity or item. It is a process by which appropriations are encumbered against future expenditure decisions of management.
Commitment accounting strengthens public financial management in the following ways:

• It ensures that departments do not over spend their appropriation without further authorisations.
• It also ensures that spending is done within the ambit of a vote hence misapplication funds may be reduced or curtailed.
• It promotes effective planning of expenditure within the available resources and ensure that disbursements are synchronised with commitment.

At the commitment stage, it is necessary to verify that:

• The proposal to spend money has been approved by an authorized person;
• Procurement process has been completed;
• Money has been appropriated for the purpose in the budget and sufficient funds remain available in the proper category of expenditure;
• The expenditure is proposed under the correct category; and
• The institutions prepare, commit and issue approved Purchase Orders (PO) to the supplier.

• Better national/international comparability and consistency of financial information.
• Transparency in government accounting and financial reporting which influences government’s cost of refinancing.
• Enhancement of accountability and oversight control.
• Focus on public-sector-specific issues in financial reporting.
• Better recognition of risks, opportunities, cost awareness and efficiency.
• Improved government finance statistical information.
• Better decision-making and improvement of assets and liabilities management.