GFS 2001 Manual-

Basic Concepts

Presented by

Prof. Tarun Das

IILM, New Delhi-110001.
Presently ADB Adviser, MOF, Mongolia.
Formerly, Eco. Adviser, MOF, India.

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 Contents
1. GFS 2001 and GFS 1986
2. GFS 2001 Basic Concepts
3. GFS 2001 Basic Accounting Tables-
Case Study for Mongolia
4. Reconciliation between two GFS
5. Workout Sessions 2 and 3

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 1.1 GFS 2001 and GFS 1986
 There are three basic differences.
(1)GFS 2001 is based on accrual
accounting, whereas GFS 1986 uses
cash accounting.
(2) GFS 2001 considers both financial
and physical assets, whereas GFS
2001 considers only financial assets.
(3) GFS 2001 integrates the whole
system into a Balance Sheet for the
government, whereas GFS 1986 does
not produce balance sheet.

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 1.2 GFS 2001 Uses Accrual Accounting
 As compared with GFS 1986 which
uses cash accounting, GFS 2001 is
based on Accrual Accounting.
 Flows are recorded at the time
economic value is created,
transformed, exchanged, transferred,
or extinguished.
 In other words, the effects of
economic events are recorded in the
period in which they occur,
irrespective of whether cash was
received or paid or was due to be
received or paid.
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 1.3 GFS 2001 Uses Accrual Accounting

In general, the time attributed to

events is the time at which ownership
of goods changes, services are
provided, the obligation to pay taxes is
created, the claim to a social benefit
payment is established, or other
unconditional claims are established.

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 1.4 An Example of Accrual Accounting
• The following example considers a
week in the life of a small government.
• The effects of the following five
transactions are shown in the financial
statements below:
a. Corporate taxpayers are required to
make tax payments of $100 million to
the government, but only $90 million is
received. At the end of the week, $10
million is outstanding.
b. The government sells fixed assets for
$100 million. The assets had been
valued at $100 million.

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 1.5 An Example of Accrual Accounting
c. Government salary payments are made
during the week. In addition to paying
employees $60 million, the government
is obligated to contribute for their
pensions when they retire—employees
earned $30 million in future pension
rights during the period.
d. The government settles a long-running
legal dispute. It agrees to pay $30
million to the plaintiff in 2 months’ time.
e. All the government’s external
borrowings are held in foreign
exchange. The exchange rate declined
by 2% during the week.

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 1.6 Cash Accounting

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 1.7 Accrual Accounting

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 1.8 An Example of Accrual Accounting

• Cash accounting would report a $130

million surplus, while the accrual
operating statement shows a $30
million deficit.
• The $160 million difference arises from
the following fact:
• Cash accounting ignores the pension
liability ($30 million), the asset already
had a value equal to its sale price ($100
million), the exchange rate change ($10
million), the judgment liability ($30
million), and the taxes to be received
($10 million).

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 1.9 Balance Sheet

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 2.1 GFS 2001 Basic Concepts
• A debit is an increase in an asset, a
decrease in a liability, or a decrease in
net worth.
• Conversely, a credit is a decrease in an
asset, an increase in a liability, or an
increase in net worth.
• Revenue entries, which represent an
increase in net worth, are recorded as
credits.
• Conversely, an expense refers to a decrease
in net worth and is recorded as a debit.

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 2.2 GFS 2001 Basic Concepts
• A balance sheet is a compilation of a unit’s
assets, liabilities, and net worth.
• The fundamental identity of the
balance sheet and of accounting in
general is that the total value of the
assets always equals the total value of
the liabilities plus net worth.
• Use of the double-entry system ensures
that this identity is correctly maintained.

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 2.3 GFS 2001 Economic Flows

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 3.1 GFS 2001 Statements and Tables
Statement I: Government Operations
Statement II: Sources and Uses of Cash
____________________________________________
Table 1: Revenue
Table 2: Expense
Table 3: Transactions in A&L (assets & liabilities)
Table 4: Holding Gains and Losses in A&L
Table 5: Other Changes in the Volume of A&L
Table 6: Balance Sheet
Table 7: Functional Classification of Outlays
Table 8: Transactions in Financial A&L
Table 9: Total Other Economic Flows in A&L
____________________________________________
Annex 1: Consolidation Table
Annex 2: Integrated Stat. of Stocks and Flows in A&L

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 3.2 Statement of govt operations –
Mongolia 2003
Items Billion MNT
Statement of govt operations
1. Revenue 599.94
2. Expense 465.85
GOB Gross operating balance (1-2) 134.09
Less Consumption of fixed capital 0
NOB Net operating balance 134.09
31 Net acquisition of nonfinancial assets 139.02
NLB Net lending/ borrowing (NOB-31) -4.93
32 Net acquisition of financial assets 54.86
33 Net incurrence of liabilities 63.22
NLB Statistical discrepancy (NLB-32-33) 3.43
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 3.3 Balance Sheet
 
Balance sheet  
6 Net worth (61+62-63) -449.42
61 Nonfinancial assets 1306.79
62 Financial assets 0
63 Liabilities 1756.21

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 3.4 Sources and Uses of Cash
1 Cash receipts from opert. activities 489.77
11 Taxes 287.27
12 Social securities 54.93
13 Grants 19.31
14 Other receipts 128.26
2 Cash payments for opert. expenses 402.92
21 Compensation of employees 112.1
22 Purchases of goods and services 163.93
24 Interest 20.04
25 Subsidies 8.79
26 Grants 0.62
27 Social Benefits 90.62
28 Other payments 6.82
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 3.5 Sources and Uses of Cash
CIO Net cash inflow from oper.activities 86.85
31.1 Purchases of nonfinancial assets 99.65
31.2 Sales of nonfinancial assets 0
31 Net cash outflow from investments 99.65
in nonfinancial assets  
CSD Cash surplus/ deficit -12.8
32x Net acquisition of fin.assets,excl.cash 37.04
321x Domestic 36.74
322x Foreign 0.3
323 Monetary gold and SDR 0
33 Net incurrence of liabilities 65.36
331 Domestic -16.86
332 Foreign 82.22
NFB Net cash inflow from financial activities 28.32
NCB Net change in the stock of cash 15.52
CSD Statistical discrepancy 0
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 3.6 Table-1 Revenue

1 Revenue 599.94
11 Taxes 353.69
111 taxes on income, profits, capital gains 97.58
1111 Individuals 28.8
1112 Corporations and other enterprises 68.78
112 Taxes on payroll and workforce 0
113 Taxes on property 12.66
114 Taxes on goods and services 209.96
1141 General taxes on goods and services 121.87
1142 Excises 58.58
115 Taxes on Intnl. trade & transactions 32.65
116 Other taxes 0.84
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 3.7 Table-1 Revenue
12 Social contributions 90.84
121 Social security contributions 90.84
122 Other social contributions 0
13 Grants 8.73
131 From foreign governments 8.66
132 From international
organisations 0.06
133 From other general govt units
0.01
14 Other revenue 146.68

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 3.8 Table-2 Expense by Economic Type
2 Expense 465.85
21 Compensation of employees 142.92
211 Wages and salaries 117.34
212 Social contributions 25.58
22 Use of goods and services 178.23
23 Consumption of fixed capital 0
24 Interest 17.65
25 Subsidies 9.38
26 Grants 0.73
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 3.9 Table-2 Expense by Economic Type
261 To foreign governments 0
262 To international organisations 0.72
263 To other general govt units 0.01
2631 Current 0.01
2632 Capital 0
27 Social Benefits 116.81
28 Other expense 0.13
281 Property expense other than int. 0
282 Miscellaneous other expense 0.13
2821 Current 0.13
2822 Capital 0

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 3.10 Table-3 Transactions in Assets & Liabilities

31 Net acquisition of nonfinancial

assets 139.02
311 Fixed assets 100.14
3111 Buildings and structures 96.77
3112 Machinery and equipment 1.38
3113 Other fixed assets 1.99
312 Inventories 38.01
313 Valuables 0
314 Nonproduced assets 0.87
3141 Land 0
3142 Subsoil assets 0
3143 Other naturally occurring assets 0.64
3144 Intangible nonproduced assets 0.23
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3.11 Table-3 Transactions in Assets & Liabilities

32 Net acqn. of financial assets 54.86

by instruments  
3202 Currency and deposits 160.4
3203 Securities other than shares 0
3204 Loans 19.17
3205 Shares and other equity -19.37
3206 Insurance technical services 0
3207 Financial derivatives 0
3208 other accounts receivables 0
By debtor  
321 Domestic 62.67
322 Foreign -7.81
323TARUN
UNSIAP Monetary
DAS gold and
SESSIONSDR
5-6 GFS 0
25
3.12 Table-3 Transactions in Assets & Liabilities

33 Net incurrence of liabilities 63.22

by instruments
3302 Currency and deposits 0
3303 Securities other than shares 78
3304 Loans -22.66
3305 Shares and other equity 0
3306 Insurance technical reserves 0
3307 Financial derivatives 0
3308 Other accounts payable 0
By creditor
331 Domestic 162.98
332 Foreign -99.76
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 3.13 Table-6 Balance Sheet
6 Net worth -449.42
61 Nonfinancial assets 1306.79
611 Fixed assets 1140.59
6111 Building and structures 788.79
6112 Machinery and equipment 309.16
6113 Other fixed assets 42.64
612 Inventories 165.97
613 Valuables 0
614 Nonproduced assets 0.23
6141 Land 0
6142 Subsoil assets 0
6143 Other naturally occurring assets 0
6144 Intangible nonproduced assets 0.23
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 3.14 Table-6 Balance Sheet
62 Financial assets
by instruments 1477.94
6202 Currency and deposits 162.96
6203 Securities other than shares 0
6204 Loans 931.38
6205 Shares and other equity 357.7
6206 Insurance technical reserves 0
6207 Financial derivatives 0
6208 Other accounts payable 25.9
By creditor 1477.94
621 Domestic 1477.94
622 Foreign 0
623 Monetary god and SDR 0
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 3.15 Table-6 Balance Sheet
63 Liabilities 1756.21
by instruments
6302 Currency and deposits 0
6303 Securities other than shares 108.84
6304 Loans 1626.92
6305 Shares and other equity 0
6306 Insurance technical services 0
6307 Financial derivatives 0
6308 other accounts payable 20.45
By debtor
631 Domestic 320.72
632 Foreign 1435.49
Memorandum items
6M2 Net financial worth -278.28
6M3 Debt at market value n.a.

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 3.16 Table-7 Outlays by Functions of Govt
7 Total outlays 502.58
701 General public services 88.94
7017 Public debt transactions 20.04
7018 General transfers between levels of govt 0
702 Defense 24.91
703 Public order and safety 29.76
704 Economic affairs 95.88
7042 Agriculture and allied 15.07
7043 Fuel and energy 17.28
7044 Mining, manufacturing, construction 3.57
7045 Transport 31.78
7046 Communications 20.4
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3.17 Table-7 Outlays by Functions of Govt
705 Environmental protection 1.47
706 Housing and community services 7.57
707 Health 52.54
7072 Outpatient services 48.7
7073 Hospital services 0
7074 Public health services 3.84
708 Recreation, culture and religion 15.88
709 Education 88.23
7091 Pre-primary and primary education 67.25
7092 Secondary education 15.12
7094 Tertiary education 5.86
710 Social protection 97.4
7 Statistical discrepancy, total outlay 0
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 3.18 Table-8 Transactions in Financial A&L

82 Net acquisition of financial assets 54.87

821 Domestic 62.68
8211 General government -35.3
8212 Central bank 58.57
8213 Other depository corporations 20.37
8214 Financial corporations n.i.e. 0
8215 Nonfinancial corporations 15.81
8216 Households & NPIs serving households 3.23
822 Foreign -7.81
8221 General government 0
8227 International organisations 0
8228 Financial operations other than Intl.Orgns. -7.81
8229 Other non-residents 0
823 Monetary gold and SDR 0
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 3.19 Table-8 Transactions in Financial A&L

83 Net incurrence of liabilities 63.22

831 Domestic 162.98
8311 General government -34.73
8312 Central bank 169.28
8313 Other depository corporations 19.55
8314 Financial corporations n.i.e. 0
8315 Nonfinancial corporations 8.88
8316 Households & NPIs serving households 0
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 3.20 Table-8 Transactions in Financial A&L

832 Foreign -99.76

8321 General government 0
8327 International organisations 0
8328 Financial operations other than 0
international organisations
8329 Other non-residents -99.76
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 4.1 GFS 1986 and GFS 2001

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 4.2 GFS 1986 and GFS 2001

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 4.3 GFS 1986 and GFS 2001

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 5.1 GFS Workout Session-2
1. The table (given in Excel File UNSIAP Tarun Das
Session-5 GFS Workshop-2 provides the Fiscal
Statements for Mongolian General Government
sector for the year 2003 (Jan-Dec) as per GFS
Accounting standards.
• But, it has the following two limitations:
(a) It does not estimate the Consumption for Fixed
Capital.
(b) It does not provide the Statement for Cash
Balance for 2003 (in the table cash balance is
given for 2002).
2. Estimate depreciation expenses (i.e. consumption of
fixed capital) by taking broad categories of assets
and assuming expected life of assets. Then rework
the Statements on Expenses and General
Government Operations.

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 5.2 GFS Workout Session-3
1. The table (given in Excel File UNSIAP Tarun
Das Session-6 GFS Workshop-3 provides
General Government Finance Accounts of
Australia as per Australian Accounting
Standard, which differ to some extent from
the GFS 2001 accounting principles. The
differences are indicated in the excel file.
2. Given above information, estimate the
operating balance as per GFS 2001
accounting standards for Australian General
Government Sector for 2005-06.
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 Thank you –
Have a Good Day

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