Manual of Accounting Principles New

Manual of Accounting Principles Table of Contents
TABLE OF CONTENTS
1 OVERVIEW - PURPOSE AND SCOPE OF THE MANUAL 1.1

1.1 Purpose of the Manual 1.2
1.2 Structure of the Manual 1.3

1.2.2 Reader guidance 1.3
1.3 Authority, applicability, distribution and maintenance of the Manual 1.4

1.3.1 Authority 1.4
1.3.2 Effective date 1.4
1.3.3 Coverage 1.4
1.3.4 Compliance 1.5
1.3.5 Distribution, maintenance and update 1.5
1.3.6 Explanatory note 1.6
2 ACCOUNTING CONCEPTS 2.1

2.1 Consolidated Fund and Public Account 2.2
2.1.1 Introduction 2.2
2.1.2 Certain funds and accounts to be kept by Governments 2.2
2.1.3 Consolidated Fund 2.2
2.1.4 Public Account 2.2
2.2 Accounting Model 2.5

2.2.2 Accounting elements 2.5
2.2.3 Revenues 2.5
2.2.4 Expenditure and commitments 2.5
2.2.5 Assets 2.6
2.2.6 Liabilities 2.7
2.2.7 Equity 2.7
2.2.8 Double entry book keeping 2.7
2.2.9 Classification of transactions 2.7
2.3 Internal Control 2.11

2.3.2 Definition 2.11
2.4 Budgeting 2.12

2.4.2 Budgeting 2.12
3 ACCOUNTING POLICIES 3.1

3.1 Accounting period 3.2
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3.1.2 Accounting period 3.2

3.2 Accounting records 3.3

3.2.3 Making of proper entries 3.3
3.2.4 Errors omission and corrections 3.3
3.2.5 Maintenance of accounting records 3.3
3.2.6 Minimum periods for retention 3.4
3.3 Accounting elements 3.5

3.3.2 Assets 3.5
3.3.3 Liabilities 3.5
3.3.4 Equity 3.6
3.3.5 Revenues 3.7
3.3.6 Expenses 3.7
3.4 Banking 3.11

3.4.2 Banking 3.11
3.5 Reporting 3.13

3.5.2 Reporting 3.13
3.6 Inter entity transactions 3.16

3.6.2 Inter entity transactions 3.16
4 ORGANISATION OF FINANCIAL AND ACCOUNTING RESPONSIBILITIES

4.1
4.1 Financial and accounting responsibilities of the Public Accounts Committee 4.2
4.1.1 Responsibilities 4.2
4.1.2 Constitution 4.2
4.1.3 Accountability 4.2
4.2 Financial and accounting responsibilities of the Auditor-General’s Office 4.3

4.3 Financial and accounting responsibilities of the Office of the Controller General of
Accounts 4.5
4.4 Financial and accounting responsibilities of the Accountants-Generals’ Offices 4.7


4.5 Financial and accounting responsibilities of the Ministry of Finance - Finance Division
(Federal) / Department (Provincial) 4.8
4.6 Financial and accounting responsibilities of the Central Board of Revenue 4.9
4.6.3 Explanatory Note 4.9
4.7 Financial and accounting responsibilities of the State Bank of Pakistan and its agent/s
4.10
4.8 Financial and accounting responsibilities of centralised accounting entities. 4.11

4.8.2 Determination of entities to be included in Schedule 1 & 2 of this Manual. 4.11
4.9 Financial and accounting responsibilities of Schedule 1 entities 4.12

4.9.2 Determination of entities to be listed in Schedule 1 4.12
5 FINANCIAL AND ACCOUNTING RESPONSIBILITIES OF

ADMINISTRATIVE FINANCIAL AND ACCOUNTS OFFICERS 5.1
5.1 Financial and accounting responsibilities of financial officers 5.2
5.2 Financial and accounting responsibilities of Principal Accounting Officers 5.3

5.2.1 Position 5.3
5.3 Financial and accounting responsibilities of the Financial Adviser 5.4

5.3.1 Position 5.4
5.4 Financial and accounting responsibilities of Finance and Accounts Officers 5.5
5.4.1 Position 5.5
5.5 Financial and accounting responsibilities of Internal Audit Officer 5.6

5.5.1 Position 5.6
5.6 Financial and accounting responsibilities of Project Director 5.7

5.6.1 Position 5.7


5.7 Financial and accounting responsibilities of Auditor-General of Pakistan 5.8

5.7.1 Position 5.8
5.8 Financial and accounting responsibilities of Controller General of Accounts 5.9

5.8.1 Position 5.9
5.9 Financial and accounting responsibilities of Accountants-General 5.10

5.9.1 Position 5.10
6 SCHEDULE 1 - SELF ACCOUNTING ENTITIES 6.1

6.1 Schedule of self accounting entities 6.2
7 SCHEDULE 2 - EXEMPT ENTITIES 7.1

7.1 Schedule of exempt entities 7.2

Manual of Accounting Principles Overview
1 Overview - purpose
and scope of the
Manual
Issued May 2005 Page1 overfin.doc

1.1 Purpose of the Manual
1.1.1.1 The purpose of this Manual is to:

 set out the accounting principles to be used in accounting for the
transactions of centralised and self accounting entities within the control
of the Federal and Provincial Government. It excludes exempt entities as
defined in Schedule two of this manualManual
 outline the roles and accountability of specified organisations and officers
of the centralised accounting and self accounting entities
1.1.1.2 This manual will cover the Principles, Policies and Procedures in relation to
Centralised Accounting Entities and will only lay down the Principles for Self
Accounting Entities because the Policies and Procedures for Self Accounting
Entities are covered by their individual rules and regulations.
1.1.1.3 This Manual defines the framework within which accounting transactions are to
be treated and recorded, and accounting and financial responsibilities are to be
assigned.
1.1.1.4 Detailed accounting policies and procedures are contained in the Accounting
Policies and Procedures Manual. Reference should be made to the Accounting
Policies and Procedures Manual, Financial Reporting Manual, Chart of
Accounts, Manual of External Reporting Requirements in determining the rules
and procedures for the treatment and recording of specific transactions.
1.1.1.5 Documents relevant to accounting and financial management of centralised

accounting and self accounting entities include:
 Chart of Accounts
 Delegation of Financial Power under the Financial Rules
 Rules of Business
 Accounting Policies and Procedures Manual
 General Financial Rules
 Federal/Provincial Treasury Rules
 Financial Reporting Manual
 Manual of External Reporting Requirements

1.2 Structure of the Manual
1.2.1.1 This Manual is in three parts.
1.2.1.2 The first part of this Manual, comprising section 1, provides an overview of the
purpose and scope of this Manual.
1.2.1.3 The second part of this Manual, comprising sections 2 and 3, sets out the
accounting principles to be used by centralised accounting and self accounting
entities and upon which the detailed policies and procedures contained in the
Accounting Policies and Procedures Manual are based.
1.2.1.4 The third part of this Manual, comprising sections 4 and 5, outlines the financial
and accounting responsibilities of specified organisations and financial officers
1.2.1.5 There are two Schedules attached to this Manual.
1.2.1.5.1 Schedule 1 is a list of all self accounting entitiesdetails examples of

Self Accounting Entities.
1.2.1.5.2 Schedule 2 is a list of all exempt entitiesdetails examples of

Exempt Entities.
1.2.2 Reader guidance
1.2.2.1 The organisation of the sections, headings and sub headings is shown in the
Table of Contents at the front of this Manual.
1.2.2.2 The layout of each page within this Manual is standardised. The title of the
Manual and the name of the chapter are displayed in the top left and right
corners of each page respectively. The footer for each page contains the issue
date, page number and file reference.
1.2.2.3 Each section of this Manual has the principles appearing at the front of the
section. Any detailed or additional explanation and guidance is contained in the
“Explanatory notes” subsection. Principles should not be interpreted without
first making reference to the explanatory notes.

1.3 Authority, applicability, distribution and maintenance of the Manual
1.3.1 Authority
1.3.1.1 This Manual is issued to set out the accounting principles in accordance with
which the accounts of the federation and the provinces shall be kept, in
pursuance of article, 170 of the Constitution of Islamic Republic of Pakistan.
1.3.2 Effective date
1.3.2.1 The effective date for application of this Manual is the date of issue of the
Manual by the Auditor-General.
1.3.2.2 All accounting entities will have up to two financial years (commencing from 1
July subsequent to the effective date of release) to be in full compliance with this
Manual.
1.3.3 Coverage
Accounting entity
1.3.3.1 An accounting entity is any unit of Government (eg. ministry, division, and
department), whose principal source of funding is an appropriation from the
Federal and Provincial Governments, which prepares input to the accounting
system and which is not defined in Schedule 2 of this Manual.
1.3.3.2 There are two types of accounting entities, namely centralised accounting
entities and self accounting entities.
Centralised accounting entities
1.3.3.3 A centralised accounting entity is any accounting entity for whom the
Accountant-Generaloffice of the Controller General of Accounts has primary
responsibility for the accounting and reporting function of that entity.
1.3.3.4 Unless specifically stated otherwise the term accounting entity will include all
centralised accounting entities.
Self accounting entities
1.3.3.5 A self accounting entity is any accounting entity for whom the Principal
Accounting Officer has primary responsibility for the accounting and reporting
functions. A list of these entities is contained in Schedule 1 of this Manual.
1.3.3.6 Unless specifically stated otherwise, the term accounting entity will include all
self accounting entities.
Exempt entities
1.3.3.7 An exempt entity is any entity defined in Schedule 2 of this Manual.
1.3.3.8 The term accounting entity excludes exempt entities.

1.3.4 Compliance
1.3.4.1 Compliance with the Manual is mandatory for all accounting entities.
1.3.4.2 In the event that a guideline in this Manual conflicts with other Manuals,
directives or practices, other than those amending this Manual, the guidance in
this Manual will prevail.
1.3.4.3 Accounting entities are not authorised to implement accounting principles in

conflict with, or contrary to, those set out in this Manual.
1.3.4.4 Sections 5 4 and 6 5 covering the “Organisation of Financial and Accounting

Responsibilities” and the “Financial and Accounting Responsibilities of Financial
Officers” provide specific guidance as to the accounting and financial
management responsibilities of key organisations and financial officers.
1.3.4.5 The guidance contained in sections 6 and 74 and 5 are in addition to, and in no
way negate or replace those responsibilities and accountabilities contained in the
Delegation of Financial Power under the Financial Rules, the Authorities
Manual, the Rules of Business and any other directives issued by a competent
authority.
1.3.5 Distribution, maintenance and update
1.3.5.1 The Auditor-General of Pakistan will be responsible for:

 the initial issue of the Manual to all Principal Accounting Officers of
accounting entities
1.3.5.2 The Controller General of Accounts will be responsible for:
 the maintenance and update of the Manual, including distribution of any

updates or amendments to all Principal Accounting Officers of
accounting entities. However, where a change to methods and principles
defined in NAM is to be introduced, this will be updated/changed in
consultation with the Auditor General of Pakistan.
1.3.5.3 The Auditor-General of Pakistan will be responsible for:

 the initial issue of the Manual to all Principal Accounting Officers of
accounting entities
 the maintenance and update of the Manual, including distribution of any
updates or amendments to all Principal Accounting Officers of
accounting entities
1.3.5.4 For all accounting entities, the Principal Accounting Officer will ensure that:
 initial copies of the Manual are distributed to all finance and accounts
officers within the accounting entity
 all subsequent updates and amendments of the Manual are distributed to
all finance and accounts officers within the accounting entity

1.3.6 Explanatory note
Statutory and legal requirement for compliance
1.3.6.1 Compliance with the directives and principles contained in this Manual are
mandatory as the principles and directives contained in this Manual have been
issued under the the Pakistan (Audit and Accounts) Order 1973Ordinance 2001.
The powers and functions of Auditor General of Pakistan are contained in
Auditor General’s (Functions, Powers and Terms and Conditions of Service)
Ordinance 2001, while the powers and functions of Controller General of
Accounts are contained in Controller General of Accounts (Appointment,
Functions and Powers) Ordinance 2001.
1.3.6.2 The Ordinance 2001 for the Controller General of Accounts provides that the
Controller General of Accounts will prepare and maintain the accounts of the
Federation, the Provinces and district governments in such forms and in
accordance with such methods and principles as the Auditor-General may, with
the approval of the President, prescribe from time to time. The Pakistan (Audit
and Accounts) Order 1973, provides that the Auditor-General will be
responsible for keeping the accounts of the Federation and of each Province,
other than certain specified entitiesThe Ordinance 2001 for the Auditor General
of Pakistan provides that the Auditor General will certify accounts of
Federation, of each Province and of each district. The two Order Ordinances
areis issued subsequent to Article 170 of the Constitution of the Islamic
Republic of Pakistan which states that “the accounts of the Federation and of
the Provinces shall be kept in such form and in accordance with such principles
and methods as the Auditor-General may, with the approval of the President
prescribe”.
Note: The Pakistan Audit and Accounts Order 1973 will be substituted by “ Pakistan Audit and
Accounts Act” when passed by the Parliament.

Manual of Accounting Principles Accounting concepts
2 Accounting concepts
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2.1 Consolidated Fund and Public Account
2.1.1 Introduction
2.1.1.1 The purpose of this section is to define and detail the principles upon which the
Consolidated Fund and Public Account are established and operate.
2.1.2 Certain funds and accounts to be kept by Governments
2.1.2.1 Each Provincial Government and the Federal Government will maintain a
Consolidated Fund and a Public Account.
2.1.2.2 Each Local Government shall have a Fund and a Public Account as defined in
the Local Government Ordinance 2001 (Chapter XII LGO 2001).
2.1.3 Consolidated Fund
Definition
2.1.3.1 All moneys received, all loans raised and all moneys received in repayment of
any loan by the Government, will form the Consolidated Fund of the
Government.
Schedule of Authorised Expenditure
2.1.3.2 No expenditures will be met from the Consolidated Fund unless specified in a
duly approved “Schedule of Authorised Expenditure”.
2.1.4 Public Account
Definition
2.1.4.1 The following moneys will form the Public Account:

 received by or on behalf of the Government, other than those belonging
to the Consolidated Fund
 deposited with the Supreme / High Court or any other court established
under authority of the Government
 collected by the Local Government on behalf of other parties or held in
trust for a special purpose are not available for annual appropriation.
Expenditure from and receipts to the Public Account
2.1.4.2 All receipts and withdrawals from the Public Account will be regulated by Act
of Parliament or in the absence of such an Act, shall be determined by rules
made by the President / Governor.

Constitutional requirements
2.1.5.1 Articles 78 and 118 of the Constitution of the Islamic Republic of Pakistan
provide that each Provincial Government and the Federal Government will
maintain a Consolidated Fund and Public Account. The Local Government
Ordinance 2001 provides that each Local Government will maintain a Fund and
Public Account.
2.1.5.2 The Constitution further provides that:

 all moneys received by that Government, all loans raised by that
Government and all moneys received by it in repayment of any loan will
form part of that Fund
 all other moneys, other than those belonging to the Consolidated Fund
will form the Public Account
2.1.5.3 Articles 83 and 123 determine that no expenditure may be incurred upon the
Consolidated Fund unless it has been duly authenticated. Expenditure is deemed
to be duly authenticated if, and only if:
 it has been specified in the “Schedule of Authorised Expenditure” (the
Schedule being the grants made or deemed to have been made by the
National / Provincial Assembly, in accordance with Articles 82 and 122)
 the Schedule has been signed by the Prime Minister / Chief Minister
 the Schedule has been laid before the National / Provincial Assembly.
2.1.5.4 The “Schedule of Authorised Expenditure” is valid for that financial year only
(Article 80 and 120).
2.1.5.5 Articles 79 and 119 state that all receipts into and withdrawals from the Public
Account require an Act of Parliament or in the absence of such an Act, rules
made by the President / Governor.
Consolidated Fund - role and function
2.1.5.6 The Consolidated Fund is the operating account of the Government, the balance
of which is available for appropriation against the general operations of
Government.
Public Account - role and function
2.1.5.7 The Public Account consists of those specific purpose moneys for which the
Government has a statutory or other obligation to account for, but which are
not available for appropriation against the general operations of Government.
The Public Account will therefore consist of a series of accounts, each of which
will have specific rules governing its operation.

Consolidated Fund - modified cash, accrual accounting and the Schedule

of Authorised Expenditure
2.1.5.8 It is a requirement of the Constitution that no expenditure from the

Consolidated Fund shall be deemed to be duly authorised unless it is specified in
the Schedule of Authorised Expenditure.
2.1.5.9 The Constitution also requires that the Schedule of Authorised Expenditure
lapse with the passing of each financial year.
2.1.5.10 However, as expenditure can only be charged against the Consolidated

Fund when a cash payment is made. This in no way precludes commitments and
accruals being recognised and brought to account, as they are recognised
against an non-cash or accrual item eg. commitments or creditors, not against
the Consolidated Fund (until such time as the cash payment is made).
2.1.5.11 While the Constitution does not preclude the bringing to account of
accruals or commitments, it does prevent the accruals or commitments from
being paid against a prior year’s Schedule of Authorised Expenditure. For this
reason, entities with accruals or commitments from a previous period should
ensure that they have allowed for the payment of these accruals and
commitments against that year’s Schedule of Authorised Payments.

2.2 Accounting Model
2.2.1 Introduction
2.2.1.1 The purpose of this section is to outline the accounting model for the
application of the accounting policies contained in section.
2.2.2 Accounting elements
2.2.2.1 Revenues, expenses, assets, liabilities and equity will be recognised in

accordance with the principles set down in section 3.3 and as detailed in the
Chart of Accounts Manual.
2.2.3 Revenues
2.2.3.1 All revenue will be accounted for on an as received basis, in accordance with the
definitions laid down in section 3.3.5 of this Manual and the directives contained
in the Accounting Policies and Procedures Manual.
Example
2.2.3.2 A tax assessment is issued on 2 August and the payee makes payment on 1
September. In this example the revenue would be recognised not upon the issue
of the assessment on 2 August but upon the receipt of the cash from the payee
on 1 September.
2.2.4 Expenditure and commitments
Expenses
2.2.4.1 All expenses will be accounted for on a cash basis or on a committed basis in
accordance with the definitions laid down in 3.3.6 of this Manual and the
directives contained in the Accounting Policies and Procedures Manual.
Commitments
2.2.4.2 Commitments will be recognised when and only when there is a properly
authorised obligation to make a payment against the Schedule of Authorised
Expenditure, for which the amount of the transaction is known and the supplier
has been nominated, not when the cash is paid.
2.2.4.3 Commitments should not be entered into where the total value of the
commitment will result in total expenditure in excess of the Schedule of
Authorised Expenditure.
2.2.4.4 Commitments will be reversed when and only when any of the following
conditions are met:
 the cash payment is made
 the authorisation to make the payment lapses ie. end of financial year
 the obligation to make a future payment ceases to exist

2.2.4.5 All commitments will lapse in accord with the Schedule of Authorised
Expenditure to which they relate ie. at the end of the financial year.
Commitments lapsing at year end and validated for the next financial year should
be reinstated with the commencement of the following year’s Schedule of
Authorised Expenditure.
2.2.4.6 Commitments will only be recognised when the value of the commitment
exceeds the threshold criteria set down in the Accounting Policies and
Procedures Manual.
Example
2.2.4.7 An entity enters into a commitment to purchase a photocopier on the 2 March

but makes payment on 6 April. In this example the commitment would be
recorded against the appropriation on 2 March. With the making of the
payment on 6 April, the commitment would be reversed and the expense
recognised.
2.2.4.8 Explanatory Note
An authorised obligation means that a legal requirement exists to honour the

terms of the contract.
Commitments relate to authorised obligations to make payments against the

current Schedule of Authorised Expenditure. Where there is an authorised
obligation to make payments against a future Schedule of Authorised
Expenditure, such obligations will be recognised as Deferred Liabilities in
accordance with the directives laid down in Chapter 11 of the Accounting
Policies and Procedures Manual.
2.2.5 Assets
2.2.5.1 All assets will be accounted for on a modified cash basis in accordance with the
definition laid down in section 3.3.2 of this Manual, and the directives contained
in the Accounting Policies and Procedures Manual
Example
2.2.5.2 There is a three year development plan to construct a new building, with Rs 1
million worth of expenditure being incurred each financial year. In this example
the Rs 1 million would be recognised in accordance with the principles on
expenses eg. Rs 1 million in 19X120X1, Rs 1 million in 19X2 20X2 and Rs 1
million in 19X320X3. However, upon completion of the building, the building
would be recorded in the asset register of the entity responsible for the asset at
the constructed cost of Rs 3 million. Certain entities may choose to record the
expenditure against a work-in-progress memorandum ledger.

2.2.6 Liabilities
2.2.6.1 All liabilities, other than commitments (which will be accounted for on a
modified cash basis), will be accounted for on a cash basis, in accordance with
the definitions laid down in section 3.3.3 of this Manual and the directives
contained in the Accounting Policies and Procedures Manual.
Example
2.2.6.2 An entity enters into a three year lease with payments of Rs 10,000 each
financial year. In this example the payments of Rs 10,000 against the current
Schedule of Authorised Expenditure would be recognised as a commitment
upon receipt of the invoice and an expense upon making the payment. The
payment against future Schedule of Authorised Expenditure (ie the balance of
Rs 20,000) will be recognised as Deferred Liabilities.
2.2.7 Equity
2.2.7.1 Unless otherwise specified, the Government of Pakistan is the sole holder of the
residual value of all accounting entities.
2.2.7.2 Equity will be accounted for in accordance with the definitions and directives
laid down in section 3.3.4
Example
2.2.7.3 A self accounting entity is to be wound up. All assets are to be sold or
transferred and any commitments are to be paid. In this example, any residual
from the sale of assets less commitments would be payable to the Government
of Pakistan ie. the Consolidated Fund.
2.2.8 Double entry book keeping
2.2.8.1 All accounts will be maintained on a double entry basis in accordance with the
definition laid down in section 3.3.7.198 and the Accounting Policies and
Procedures Manual.
2.2.9 Classification of transactions
2.2.9.1 All transactions will be classified in accordance with the Chart of Accounts as
outlined in Chart of Accounts.
Modified cash basis of accounting
2.2.10.1 The modified basis of accounting, records transactions on a cash basis but
also takes into account the commitments, acquisition of fixed assets, and
incurrence of liabilities during an accounting period.

Adoption of a modified cash basis of accounting in Pakistan
2.2.10.2 The accounting system of the Government of Pakistan is based on a

centralised (i.e. Controller General of Accounts is responsible for Federation,
Provinces and District Government level accounts) system of accounting and
reporting, with primary focus on ensuring due control over, and reporting
against appropriations.
2.2.10.3 So long as the primary accountability of accounting officers remained

solely against appropriations, a cash basis of accounting was sufficient.
However, the need to ensure the efficient and effective allocation of resources in
addition to monitoring and ensuring due control over appropriations, has been
revised in favour of a modified cash basis with the capacity to move to a full
accrual system if and when appropriate.
2.2.10.4 An initial step in this reform process is the memorandum recording of

certain assets, liabilities and commitments (commitments in form of
memorandum account).
Accounting elements
2.2.10.5 An accounting system is simply a means of collecting, aggregating and

reporting on financial transactions. The core to any accounting system is the
accounting elements (assets, liabilities, revenues, expenses and equity) as these
form the basis upon which transactions are classified, recorded and reported
upon.
2.2.10.6 The Government of Pakistan has adopted a modified cash basis of

accounting, however, the accounting elements (as defined in section 3.3
Accounting Elements) are based on accruals concepts of accounting. While the
modified cash basis of accounting makes limited use of these definitions,
particularly in terms of the overall reporting structure, the adoption of principles
founded in a full accruals system is seen as an essential first step in moving
towards a resource based management system and the introduction of a
computerised general government accounting and reporting system.
2.2.10.7 Listed below are specific references to provide guidance in determining

the principles upon which the cash based model has been modified. Detailed
explanations on specific transaction treatment, including reporting and
accounting are contained in the Accounting Policies and Procedures Manual.
Government as owner and funder of services
2.2.10.8 The Government of Pakistan has two distinct roles within the modified
cash model. The first is as the owner of all accounting entities (section 3.3.4
Equity). The second role is as the funder of services. This distinction is
important in determining the entity / Government relationship.
2.2.10.9 As the owner of the equity the Government of Pakistan holds title to the
residual value of the accounting entity should the entity cease to operate. In
addition, it also has some say on the structure and operation of the entity.

2.2.10.10 As the funder of the services the Government is responsible for

representing the public in defining the needs of the community and ensuring
value for money in the provision of services. Defining these needs and deciding
the appropriate levels of funding is the purpose of the appropriation and
budgeting cycle.
Accounting for commitments
2.2.10.11 The primary basis for transaction accounting and reporting is cash based.
It is not of itself sufficient to ensure due and proper control over expenditure,
particularly in terms of ensuring the matching of expenditure on significant items
against appropriations. For this reason the cash basis of accounting has been
modified to account for certain expenditure on a commitments basis.
2.2.10.12 Accounting for commitments requires that transactions be recognised in

the books of accounts as and when there is a properly authorised obligation to
make a future payment, for which the amount of the transaction is known and
the supplier has been nominated.
2.2.10.13 As the principal reason for recognising commitments is the matching of

the obligation to make a future payment against the appropriation, thereby
ensuring proper control over the Schedule of Authorised Expenditure, it follows
that entities should not enter into commitments that would result in the total
accumulated expenditure to date plus outstanding commitments, exceeding the
amount specified in the Schedule of Authorised Expenditure.
2.2.10.14 As a commitment is made against a particular Schedule of Authorised

Expenditure, the commitment must lapse with the ceasing of the Schedule of
Authorised Expenditure. Since the liability for payment does not necessarily
lapse, it will be necessary for the commitment to reinstated against the following
year’s Schedule of Authorised Expenditure.
2.2.10.15 As at year end, all outstanding commitments will be disclosed. Details of

disclosure requirements and the directives for reinstatement are contained in the
Accounting Policies and Procedures Manual.
Recording of physical assets
2.2.10.16 The Government, through the development program, makes substantial

investment in the community in the form of infrastructure and other assets.
Government entities are given responsibility for the development, management
and maintenance of these assets. For this reason it is important that the
Government maintain proper records of the assets and monitors the entity
responsible for the care and maintenance of the assets. For this reason assets
will be expensed, that is charged against the current years’ appropriation, upon
purchase and recorded in an asset register as a memorandum record. The asset
registers will record assets by category and will be used to report on the assets
on a regular basis.

Supplementary information to be maintained
2.2.10.17 The base for transaction recognition and reporting is modified cash this
necessitates that certain assets and liabilities be recorded and reported.
2.2.10.18 The primary responsibility for maintaining the necessary records, such as
asset registers and schedules of liabilities, rests with the entity charged with the
responsibility for the day to day management of the asset or liability. As part of
that responsibility the entity has an obligation to maintain appropriate records
and provide the proper information to enable the reporting on the management
of those assets or liabilities to other users eg. the Government of Pakistan.
2.2.10.19 The form and content of the supplementary information will be

determined by the Ministry / Department of Finance / Controller General of
Accounts and / or the Auditor-General.
Appropriations as revenue
2.2.10.20 Within the modified cash basis of accounting, appropriations will be

recognised as revenues to the entity upon receipt of the notification of release
from the Ministry / Department of Finance in accordance with the directives laid
down in APPM.
Taxes not to be recorded as revenues of the collecting agency
2.2.10.21 Taxes, fees and fines collected on behalf of the Government will not form
revenues of the collecting agency (section 3.3.7.7), unless otherwise specified by
the Government.
Expenditures of entities not to be met direct from Consolidated Fund

Revenue
2.2.10.22 Taxes, fees and fines collected on behalf of the Government are to be paid
into the Consolidated Fund.
Revenues and expenditures to be shown gross
2.2.10.23 The netting off of expenditures and revenues is not permitted. All
revenues and all expenditures will be shown on a gross basis.
Explanatory Note
2.2.10.24 Any receipts received by the Government Office are not revenues on part
of the collecting entity and will not be retained to meet departmental or other
types of expenditure, unless otherwise permitted by the Government.
2.2.10.25 Not withstanding the above, a refund received by the Government for
goods or services purchased represents a reduction in the original expenditure
incurred by the Government. Refunds received must not be considered as
revenue.

2.3 Internal Control
2.3.1 Introduction
2.3.1.1 The purpose of this section is to provide general principles regarding internal
control as they relate to the accounting procedures of all accounting entities.
2.3.1.2 Detailed application of the mandatory internal control procedures is contained in

the Accounting Policies and Procedures Manual and as noted in Government
Finance Regulation 13.
2.3.2 Definition
2.3.2.1 The term internal control system refers to the policies and procedures adopted
by the entity to assist in achieving, as far as practicable, the financial
management and accountability objectives of the Government.
2.3.2.2 The Principal Accounting Officer in conjunction with the Internal Audit Officer
will be responsible for ensuring that a proper system of internal control exists
within the entity. This includes ensuring:
 the orderly and proper conduct of its function
 adherence to accounting policies and procedures
 stewardship of assets
 prevention and detection of fraud and error
 accuracy and completeness of accounting records
 timely and proper preparation of accounting information.
2.3.3.1 The following objectives are essential in the establishment of proper internal
control:
 all transactions are executed in accordance with the rules and regulations
issued by the Government
 all transactions and other events are promptly recorded in the correct
amount, in the appropriate accounts and in the proper accounting period
so as to permit preparation of accounting information in accordance with
the accounting policies and procedure
 recorded assets are compared with the existing assets at reasonable
intervals and appropriate action is taken regarding any differences

2.4 Budgeting
2.4.1 Introduction
2.4.1.1 The purpose of this section is to set out the principles for the authorisation of
the annual budget of the Government of Pakistan.
2.4.1.2 For detail budgeting process and procedures refer to chapter 3 – Budgetary
Control of the APPM.
2.4.2 Budgeting
Submission of estimates
2.4.2.1 Accounting entities will prepare and submit budget estimates in accordance with
the procedures set out in the Accounting Policies and Procedures Manual and
Government Finance Regulations as prescribed by the Ministry of Finance.
Annual budget statement
2.4.2.2 The Government will, for each financial year, prepare a statement of the
estimated receipts and expenditure of the Government.
Budget statement disclosure
2.4.2.3 The annual budget statement shall show separately:

 the sums to meet expenditure described by the Constitution as
expenditure charged upon the Consolidated Fund
 the sums required to meet other expenditure proposed to be made from
the Consolidated Fund
2.4.2.4 The annual budget statement shall distinguish expenditure on revenue account
from other expenditure.
The Budget
2.4.3.1 The budget is the principal document by which the Government sets out its
financial plan for the following financial year, namely how much the plan will
cost (i.e. expenditure) and how much and in what way, money will be raised to
finance the expenditure (i.e. revenue).
2.4.3.2 The budget consists of a number of documents:

 Annual Budget Statement - summary of the overall budget position
(revenue and expenditure)
 Schedule of Authorised Expenditure - detailed estimates of Consolidated
Fund - current expenditure and detailed estimates of Consolidated Fund -
development expenditure

 Finance Act - the legal instrument through which the budget becomes an
act of law. The Finance Act also makes the necessary amendments to
existing legislation required by the budget eg. amendments to tax rates,
introduction of new taxes etc.
The budget cycle
2.4.3.3 The budget cycle consists of six phases:

 setting of budget policy and initiatives - Cabinet will meet to determine
budget policy, initiatives and priorities. The budget policy, initiatives and
priorities will then be communicated to the Ministry of Finance, who will
then communicate these to ministries and departments via the financial
advisers
 preparation - the preparation of the budget papers commences in October
of each financial year with the preparation and submission of entity
estimates/bids and the subsequent review and consolidation of those
submissions by the Ministry of Finance
 authorisation - this phase commences with the submission of the annual
budget to the Assembly and is completed when the entity gains control
over its appropriations
 implementation - the next step in the cycle is for the entity to implement
the activities for which it has been funded. The recording and control of
these activities is the subject of the accounting system
 reporting - reporting is the first step through which individuals within the
entity and the Minister are held accountable for the implementation of the
budget. This step involves both internal and external reporting (refer to
section 3.5)
 performance review - this phase incorporates both internal and external
review and together with the reporting phase covers most of what is
referred to as accountability. The principal offices concerned with the
review of performance are the Auditor-General’s office and the Public
Accounts Committee

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3.1 Accounting period
3.1.1 Introduction
3.1.1.1 The purpose of this section is to define the accounting period.
3.1.2 Accounting period
Definition
3.1.2.1 “Accounting period” will be the financial year commencing 1 July and ending 30
June, and will consist of twelve monthly periods.
3.1.3.1 Article 260 of the Constitution of the Islamic Republic of Pakistan defines the
financial year as being “a year commencing on the first of July”. This definition
has been adopted for the purposes of this Manual and the Accounting Policies
and Procedures Manual.

3.2 Accounting records
3.2.1 Introduction
3.2.1.1 The purpose of this section is to define the accounting records and determine
the rules for the keeping and maintenance of those records.
3.2.2 Definition
3.2.2.1 “Accounting records” are any book of account upon which transactions are
recorded or any other document issued or used in the preparation and
processing of the transactions of accounting entities.
3.2.2.2 “Books of account” are any account, deed or any other document or record
however compiled, recorded or stored whether in written form, printed form,
microfilm, or electronic form.
3.2.3 Making of proper entries
3.2.3.1 In the preparation and processing of transactions and in all accounting and
related entries, pencil will not to be used. All entries will be inked.
3.2.4 Errors omission and corrections
3.2.4.1 Erasures (including the use of correction fluids or chemicals) are not permitted
in any books of account.
3.2.4.2 Correction of errors will be made by reversing the original entries in full and
posting the correct entries, a cross reference between the original entries and the
correcting entries will be included. Where the correction is made in a manual
system the officer making the correcting entry should initial and date the cross
reference.
3.2.5 Maintenance of accounting records
3.2.5.1 Books of account will use pre-numbered pages and primary books of accounts
eg. cash books and ledgers, are to be bound.
3.2.5.2 Under no circumstances are pages to be removed from any primary book of
account.
3.2.5.3 All electronic records will be backed up on a regular basis (preferably daily and
at least weekly).
3.2.5.4 All backups will be stored in a secure location.
3.2.5.5 Periodic backups (monthly) will be made and stored at a secure off-site location.
3.2.6 Minimum periods for retention
3.2.6.1 All accounting records will be retained either in their original form or suitable
substitute for a period of ten years from the date of certification of the latest

entry by audit or review by the PAC (whichever is latest). Some records may be
destroyed after a period of ten years.

3.3 Accounting elements
3.3.1 Introduction
3.3.1.1 The purpose of this section is to establish definitions of the elements for the
classification of transactions (namely assets, liabilities, equity, revenues and
expenses).
3.3.1.2 The Federal and Provincial Government operate on a modified cash basis of
accounting. The “definition” and “recognition criteria” for the accounting
elements listed in this section are based upon a full accruals concept. For this
reason the “Application” paragraph for each element provides guidance on the
interpretation of the definitions in a modified cash model.
3.3.2 Assets
Definition
3.3.2.1 “Assets” are future economic benefits controlled by the entity as a result of past
transactions or other past events.
Recognition criteria
3.3.2.2 An asset will be recognised when:

 it is probable that the future economic benefits will occur
 the asset possesses a cost or other value that can be measured reliably
Application
3.3.2.3 All assets will be expensed, that is charged against the current years’
appropriation, at the time of purchase
3.3.2.4 Expenditure which relates to physical assets will be recorded as memorandum

items in an “Physical Assets Register” in accordance with the definitions and
directives laid down in section 2.2.4 Expenditure and commitments.
3.3.2.5 Expenditure which relates to financial assets will be recorded as in memorandum

items in an “Financial Assets Register” in accordance with the definitions and
3.3.3 Liabilities
Definition
3.3.3.1 “Liabilities” are future sacrifices of economic benefits that the entity is presently
obliged to make as a result of past transactions or other past events.

3.3.3.2 A liability will be recognised when:

 it is probable that the future sacrifice of economic benefits will be
required
 the amount of the liability can be measured reliably
Application
3.3.3.3 Liabilities will be recognised on cash or as committed basis, with the

commitment or expense being made against the appropriation given for that
expenditure.
 Current liabilities are the obligations payable at the demand of the creditor
and those part of other obligation whose liquidation is expected within
one year of the reporting date
 Long term liabilities are the obligation which are expected to be liquidated
after a period of one year of the reporting date
3.3.3.4 Commitment will be recorded as memorandum items in the commitments

section of the “Budget Head Register” in accordance with the definitions and
3.3.3.5 Liabilities other than commitments will be recorded as memorandum items in a

“Liabilities Register” in accordance with the definitions and directives laid down
in section 2.2.4 Expenditure and commitments6 Liabilities.
3.3.4 Equity
Definition
3.3.4.1 “Equity” is the residual interest in the assets of the entity after deduction of its
liabilities.
Application
3.3.4.2 Equity will be recognised in accounting records as per codes stated in the Chart
of Accounts Manual and procedures laid down in the APPM.
3.3.4.3 All transfers of equity will be accounted for on a cash basis and will be treated
as revenues to the receiving entity and as expenses to the contributing entity.
3.3.5 Revenues
Definition
3.3.5.1 “Revenues” are increases in economic benefits in the form of increases or

enhancements of assets or decreases of liabilities that, other than those relating
to contributions by the Government as owner, result in an increase in equity.
3.3.5.2 An item of revenue will be recognised when:

 it is probable that the increase of future economic benefits related to the

increase in assets and/or decrease in liabilities will occur
 the increase in future economic benefits related to the increase in assets
and/or decrease in liabilities can be measured reliably
Application
3.3.5.3 Revenues will be recognised on a cash basis (ie. as and when the entity gains
control over the cash). In addition to this where the future revenue of a
Government can be estimated, this information will be disclosed in the accounts
by the way of a note.
3.3.6 Expenses
Definition
3.3.6.1 “Expenses” are decreases in future economic benefits in the form of reductions
in assets or increases in liabilities of the entity that, other than those relating to
distributions by Government as owners, result in a decrease in equity.
3.3.6.2 An expense will be recognised when:

 it is probable that the decrease in future economic benefits related to the
reduction in assets and/or increases in liabilities will occur
 the decrease in future economic benefits can be measured reliably
Application
3.3.6.3 Expenses will be recognised on a cash or as committed basis, with the expense
or commitment being made against the appropriation given for that expenditure.
Definition of accounting elements
3.3.7.1 The purpose of the accounting model is to portray the financial effects of
transactions. In order to do this it is necessary to group the transactions into
broad classes according to their economic characteristics. These broad classes
are to be referred to as the accounting elements, namely assets, liabilities, equity,
revenue and expenditure.
3.3.7.2 Details regarding the classification of the accounting elements are contained in
chapter 4 Chart of Accounts.
Financial assets and liabilities
3.3.7.3 The term financial assets and liabilities refers to those assets and liabilities
consisting of cash and cash equivalents. Cash equivalents are items readily
converted into cash e.g. bearer bonds.

Recognition of accounting elements
3.3.7.4 Subsequent to determining the broad classes, it is necessary to specify the

criteria that need to be met before the accounting elements can be recognised in
the books of account. The underlying assumption in determining the criteria for
recognition is there exists a present obligation or an expectation that economic
benefits will flow to or from an entity. Recognition is then based on there being
sufficient certainty that the flow of economic benefits to or from the entity will
occur.
Economic benefits
3.3.7.5 The term economic benefits refer to the potential to increase or decrease the
flow of cash or cash equivalents of the entity. However, a modified cash basis
of accounting precludes the accounting for “potential” flows, other than
commitments, and instead requires the actual cash to be accounted for.
Control and present obligations
3.3.7.6 The term “control over the future economic benefits” is defined as the capacity
of the entity to enjoy the benefits and deny or regulate the access of others to
the benefits.
3.3.7.7 Where an entity acts as an agent the revenues or expenses should not be
recorded in the primary books of account other than as a matter of stewardship.
For example, an entity collecting taxes will not normally control the future
economic benefits embodied in the tax collections and as such would not
recognise the taxes as revenues of the entity. The entity may however recognise
“taxes collected on behalf of the Government” as subsidiary information on the
overall performance of the entity.
3.3.7.8 The term “present obligations” is defined as a duty or responsibility of the entity
to act or perform in a certain way. An obligation implies the involvement of
two separate parties, namely the entity and a party external to the entity.
Occurrence of past transaction or other past event
3.3.7.9 The term “occurrence of past transaction or other past event” refers to the
requirement that, in order for an accounting element to be recognised in the
books of account, it must have been the result of a transaction or other past
event giving the entity control over the future economic benefits or giving rise
to a present obligation upon the future economic benefits.
Prior Year Adjustments
3.3.7.10 Receipts and Expenditure which occurs in the current year, relating to
previous years due to error or omission are referred to as Previous Year
adjustments.
3.3.7.11 Previous year adjustments will need to be made against the Schedule of
Authorised Expenditure in the current year with the permission of the Auditor-
General routed through the administrative/department and will be shown by way
of note accompanying the Financial Reports.

3.3.7.12 Prior year adjustments that relate to misclassification without any impact
on the cash balance of either the Consolidated Fund or Public Account and with
the permission of the Auditor-General/Controller General of Accounts routed
through the administrative ministry/department will be shown by way of note
accompanying the Financial Reports.
3.3.7.13 Detailed directions on the disclosure of prior year adjustments for

reporting purposes are contained in the Accounting Policies and Procedures
Manual.
Probability
3.3.7.14 The term probable means that the chance of the future economic benefits
or sacrifice of economic benefits arising is more likely rather than less likely.
Reliable measurement
3.3.7.15 For an accounting element to meet the recognition criteria it must possess
a cost or other value that can be measured in a manner that accurately and
faithfully represents the transactions that have occurred.
Contributions by owners and distributions to owners
3.3.7.16 Contributions by owners and distributions to owners are non-reciprocal

transfers between an entity and the Federal and Provincial Government acting in
its capacity as owner.
3.3.7.17 Distributions to owners are made at the discretion of the ownership group
or its representatives after satisfying restrictions imposed by legislation or by
agreements with other entities. Generally, an entity is not obliged to transfer
assets to owners except in the event of the entity being wound up (paragraphs
2.12.10.8 to 2.12.10.10 Government as owner and funder of services).
3.3.7.18 Within a modified cash basis of accounting contributions by owners are

recognised within the books of accounts as revenue, to the receiving entity and
as an expense to the contributing entity.
Double entry book keeping
3.3.7.19 The adoption of accounting elements, as defined above, necessitates the

adoption of a double entry book keeping system. For example the recognition
of revenue occurs simultaneously with the recognition of increases in assets or
decreases in liabilities.
Generally Accepted Accounting Principles (GAAP)
3.3.7.20 The accounting principles set out in this Manual are generally consistent
with those set out in the “Framework for the Preparation and Presentation of
Financial Statements” issued by the International Accounting Standards
Committee, in so far as that framework addresses the definition and recognition
of accounting elements.

3.4 Banking
3.4.1 Introduction
3.4.1.1 The purpose of this section is to set out the principles for banking by accounting
entities.
3.4.2 Banking
State Bank of Pakistan to be the sole banker
3.4.2.1 Government will only bank with the State Bank of Pakistan or its authorised
agent/s under the authorised agreement.
Operation of bank accounts
3.4.2.2 Government will not open or operate bank accounts outside of those authorised
by the Ministry of Finance.
Bank accounts are to be operated by authorised officers only.
3.4.2.3 All banking transactions will be conducted in accordance with the principles laid
down in the Accounting Policies and Procedures Manual and / or the Federal /
Provincial Treasury Rules as issued by the Ministry of Finance, the Controller
General of Accounts or the Auditor-General.
Withdrawals from bank accounts
3.4.2.4 All payments will be made by cheque, transfer or direct debit unless otherwise
authorised by the Ministry of Finance or the Controller General of Accounts. or
the Auditor-General.
3.4.2.5 Only official Government issued cheques will be used when making payments by
cheque unless otherwise specifically authorised by Government
3.4.2.6 All cheques and direct debits will be authorised in accordance with the policies
and procedures set out in the Accounting Policies and Procedures Manual and /
or the Federal / Provincial Treasury Rules as issued by the Ministry/Department
of Finance.
Deposits to bank accounts
3.4.2.7 All cash receipts will be deposited in branches of the State Bank of Pakistan or
the National Bank of Pakistan or their specifically authorised agents.
3.4.2.8 Cash receipts will be deposited on the day of the receipt, unless otherwise
authorised by the Ministry of Finance.
3.4.2.9 Government department should keep the cash transactions to the minimum
level.

3.4.2.10 All cash receipts will be retained in a secure location until such time as the
monies are deposited.
3.4.2.11 All deposits will be accounted for in accordance with the policies and
procedures set out in the Accounting Policies and Procedures Manual.
Reconciliation of bank accounts
3.4.2.12 At the close of each month, the entity will reconcile its books of accounts
with the bank records. This reconciliation is to be performed in accordance with
the policies and procedures set out in the Accounting Policies Procedure
Manual, GFR and Federal / Provincial Treasury Rules.

3.5 Reporting
3.5.1 Introduction
3.5.1.1 The purpose of this section is to set out the principles for reporting by
accounting entities.
3.5.1.2 The timing and format of various periodic reports are set out in the Financial
Reporting Manual.
3.5.2 Reporting
Preparation of financial reports
3.5.2.1 Financial reports will be prepared in the format and manner prescribed in the
Accounting Policies and Procedures Manual.
Purpose of financial reports
3.5.2.2 Financial reports will be prepared in a manner that will communicate

comprehensive, relevant, reliable, understandable and comparable information in
a timely manner about a reporting entity to meet the needs of the users of those
financial reports.
Purpose of financial reports
3.5.3.1 Financial reports are a means of communicating relevant and reliable

information about a reporting entity to users. The objective of those financial
reports is to meet the needs of those identified as the users of the financial
reports. Those needs depend, in turn, on the activities of reporting entities and
the decisions users make about them.
3.5.3.2 Financial reports serve two broad purposes the first is to assist users in the
allocation of resources. The second purpose is to provide a mechanism to
enable an entity and the Government, as the owner of that entity, to discharge
their joint accountabilities.
Users of financial reports
3.5.3.3 Given the purpose of financial reports, it therefore follows that there are three
broad groups of users of financial reports:
 the Federal, and Provincial and Local/District Governments, and the
Provincial Governments as providers of resources
 the public as the recipient of goods and services
 the Public Accounts Committee, the Federal, and Provincial and
Local/District Governments and the public, as parties performing a
review or oversight function

Objective of financial reports
3.5.3.4 The objective of financial reports is to meet the needs of the users of those
financial reports, namely:
 to provide information about the financial position, performance and
changes in financial position of the reporting entity
 to discharge the accountability of the entity for stewardship of the
resources entrusted to them
Qualitative characteristics of information
3.5.3.5 The qualitative characteristics of information are defined in the International

Accounting Standards Committee’s “Framework for the Preparation and
Presentation of Financial Statements”, these characteristics are summarised in
the following paragraphs.
3.5.3.6 There are five qualitative characteristics to be considered in the collection and
reporting of financial information to be provided to users, these are:
 understandability - the information must be readily understood by users
with a reasonable knowledge of the activities of the entity, its economic
environment and accounting framework
 relevance - to be useful, information must be relevant to the decision
making needs of the users. It should help users in making predictions
about the outcomes of past, present or future events and / or confirm or
correct past evaluations. The information should also assist users to
assess the rendering of accountability of the entity
 reliability - users must be capable of depending on the information
contained in the financial reports to represent faithfully and without bias
or undue error, the transactions or events that either it purports to
represent or could reasonably be expected to represent. It should be
noted that the Federal and Provincial Government does not comply with
GAAP in that legal form takes precedence over economic substance
 comparability - users must be able to discern and evaluate similarities in,
and differences between, the nature and effects of transactions and
events, at one time and over time
 materiality - all financial information should be assessed as to whether its
omission or misstatement could influence the economic decisions of users
taken on the basis of the financial statements
Constraints on relevant and reliable information
3.5.3.7 Financial information which is relevant and reliable may lose its relevance if
there is undue delay in the reporting of the information. Thus, the time available
to gather and report financial information is a major constraint. In balancing the
two the overriding consideration is how best to meet the needs of users.
3.5.3.8 The Manual of Accounting Principles sets out the broad principles and
objectives to be followed in the preparation of financial reports. The

Accounting Policies and Procedures Manual details the procedures to be

followed in the preparation of accounts eg. closing of accounts, year end
adjustments etc. and prescribes the form, content and timing for the preparation
and submission of reports.

3.6 Inter entity transactions
3.6.1 Introduction
3.6.1.1 The purpose of this section is to set out the principles for accounting for inter
entity transactions by accounting entities.
3.6.2 Inter entity transactions
Definition
3.6.2.1 Inter entity transactions are accounting transactions performed by one

District/Local Government or the Province or the Federation but belonging to
budget of a different District/Local Government or Province or the Federation.
3.6.2.2 Inter entity transaction of all those entities maintaining the same bank account
should be made through book adjustment and those entities having different
bank account should be made through cheques.
Accounting treatment
3.6.2.3 Inter entity transactions will be recognised in the accounts of the receiving entity
only and will not form revenues or expenses of the incurring entity.
3.6.2.4 All inter entity transactions are to be accounted for in accordance with the
policies and procedures contained in the Accounting Policies and Procedures
Manual.

Manual of Accounting Principles Organisation of financial and
accounting responsibilities
4 Organisation of
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4.1 Financial and accounting responsibilities of the Public Accounts Committee
4.1.1 Responsibilities
4.1.1.1 The responsibilities referred to below incorporate both the Public Accounts
Committee and the Provincial Public Accounts Committee.
4.1.1.2 The Public Accounts Committee is responsible for examination and reporting as
detailed in the consolidated financial statements prepared by the Auditor-
GeneralController General of Accounts.
4.1.1.3 The responsibilities of the Public Accounts Committee are governed by the
Rules and Procedures of the National or Provincial Assembly.
4.1.1.4 The Public Accounts Committees are required to submit their findings and
recommendations to Parliament and to the Principal Accounting Officer of the
concerned entity for actioning.
4.1.2 Constitution
4.1.2.1 The Public Accounts Committee is constituted from the members of the
National or Provincial Assembly.
4.1.3 Accountability
4.1.3.1 The Public Accounts Committee reports to Parliament, however, there are no
legislative powers covering the accountability of the Public Accounts
Committee to Parliament.

4.2 Financial and accounting responsibilities of the Auditor-General’s Office
Responsibilities of the Auditor-General’s Office include (as laid down in the

Auditor General’s (Functions, Powers and Terms and Conditions of Services)
Ordinance 2001:
4.2.1.1 Auditor – General to certify accounts – The Auditor-General shall, on the

basis of such audit as he may consider appropriate and necessary, certify the
accounts, compiled and prepared by Controller General of Accounts or any
other person authorised in that behalf, for each financial year, showing under the
respective heads the annual receipts and disbursements for the purpose of the
Federation, of each Province and of each district, and shall submit the certified
accounts with such notes, comments or recommendations as he may consider
necessary to the President or the Governor of a Province or the designated
District Authority, as the case may be.
4.2.1.2 Provisions relating to Audit – The Auditor General shall –

 audit all expenditure from the Consolidated Fund of the Federation and of
each Province and to ascertain whether the moneys shown in the accounts
as having been disbursed were legally available for, and applicable to, the
service or purpose to which they have been applied or charged and whether
the expenditure conforms to the authority which governs it.
 audit all transactions of the Federation and of the Provinces relating to
Public Accounts.
 audit all trading, manufacturing, profit and loss accounts and balance sheets
and other subsidiary accounts kept by Order of the President or of the
Governor of a Province in any Federal or Provincial departments; and
 audit, subject to the provisions of this Ordinance, the accounts of any
authority or body established by the Federation or a Province, and in each
case to report on the expenditure, transactions or accounts so audited by
him.
4.2.1.3 Audit of receipts and expenditures of holders of authorities substantially

financed by loans and grants – Where any body or authority is substantially
financed by loans or grants from Consolidated Fund of Federal Government or
of any Province or of any district, the Auditor-General shall subject to the
provisions of any law for the time being in force applicable to the body or
authority, as the case may be, audit the accounts of that body or authority.
Explanation – Where the loans or grants to a body or authority from the

Consolidated Fund of Federal Government or of any Province or of any district
in a financial year is not less than five million rupees and the amount of such
grant or loan is not less than fifty per cent of the total expenditure of that body
or authority, such body or authority shall be, deemed, for the purposes of this
section, to be substantially financed by such loans or grants as the case may be.
4.2.1.4 Auditor General to give information and undertake studies, etc.- The
Auditor-General shall, in so far as the accounts enable him so to do, give to the

Federal Government, the Provincial Government and the District Government,

as the case may be, such information and to undertake such studies and analysis
as they may, from time to time, require.
4.2.1.5 Functions of the Auditor General in the case of grants or loans given to
other authorities or bodies – (1) Where any grant or loan is given for any
specific purpose from the Consolidated Fund of Federal Government or of any
Province or of any district to any authority or body, not being a foreign State or
international organisation, the Auditor General may scrutinize the accounts by
which the sanctioning authority satisfies itself as to the fulfilment of the
conditions subject to which such grants or loans were given and for this purpose
have the right of access, after giving reasonable previous notice, to the books
and accounts of that authority or body; Provided that the President, the
Governor of a Province or the authority of a district, as the case may be, is of
the opinion that it is not necessary to do so in the public interest.
4.2.1.6 (2) While exercising the powers conferred on him by sub-section (1), the
Auditor-General shall not have right of access to the books and accounts of any
authority or body if the law, by or under which such authority or body has been
established, provides for the audit or the accounts of such authority or body by
an agency other than the Auditor-General.
4.2.1.7 Audit of receipts of Federation or of Provinces or of districts – The Auditor

General shall audit all receipts which are payable into the Consolidated Fund or
Public Account of the Federal Government and of each Province and in the
accounts of each district and to satisfy himself that all such receipts which are
payable into the Consolidated Fund, Public Account or any district account have
been properly and correctly deposited and rules and procedures relating to
which receipts are being fully observed and the systems are in place to ensure
proper assessment and collection of government receipts.
4.2.1.8 Audit on accounts of stores and stock – The Auditor General shall have
authority to audit and report on the accounts of stores and stock kept in any
office or department of the Federation or of a Province or of a district.
4.2.1.9 Responsibilities of the Auditor-General’s Office include:
4.2.1.10 certify the accounts of the entities other than those specified in Schedule 2
of this Manual
4.2.1.11 report the result of the examination to the Government
4.2.1.12 supply financial information on an as required basis to the Federal or the

Provincial Governments or their representatives
4.2.1.13 submission of the annual accounts of the Federation and each Province to
the President or the Governor as the case may be
4.2.1.14 preparation and submission to the President, General Financial Statements

incorporating the summary of the accounts of the Federation and all Provinces

4.2.1.15 keeping the accounts of the entities other than those specified in Schedule
2 of this Manual
4.2.1.16 supplying the financial information as and when required to the Federal
and Provincial Governments or their representatives
4.2.1.17 monitoring the working of the Accountant-General of Pakistan Revenue

and Provincial Accountants-Generals

4.2.2 Legislative requirements
4.2.2.1 The operations of the Auditor-General are governed by the Constitution of

Islamic Republic of Pakistan and the Pakistan (Audit and Accounts) Order,
1943.
Constitutional requirements
4.2.2.2 The Auditor-General will, in relation to the accounts of the Federation and of
the Provinces and the accounts of any authority or body established by the
Federation or a Province, perform such functions and exercise such powers as
may be determined by or under Act of Parliament and, until so determined, by
Order of the President
4.2.2.3 The accounts of the Federation and of the Provinces shall be kept in such form
and in accordance with such principles and methods as the Auditor-General
may, with the approval of the President, prescribe.
4.2.2.4 The report of the Auditor-General in relation to the accounts of the Federation
and Provinces shall be submitted to the President or Governor as the case may
be.
Pakistan (Audit and Accounts) order, 1943 requirements
4.2.2.5 The Office of the Auditor-General will:

 be responsible for the audit of all transactions of the Federation and
Provinces
 be responsible for supplying information on financial matters as required
by the Federal or Provincial Government
 have authority to inspect Government treasuries and other offices
responsible for keeping subsidiary accounts
 be responsible for keeping the accounts of the Federation and of each
Province
 prepare for the Federation and for each Province an appropiastion
showing the annual receipts and disbursement, and submit these accounts
to the Federal or Provincial Governments
 comply with the order of the President for the accounts of the Federation
and the Governors for the accounts of the Provinces

 prepare and submit annually to the President a Consolidated General

Financial Statement
4.2.3.1 Office of the Auditor-General is accountable to the President of Pakistan.

4.3 Financial and accounting responsibilities of the Office of the Controller General
of Accounts
Responsibilities of the Office of the Controller General of Accounts include

(as laid down in the Controller General of Accounts (Appointment, Functions
and Powers) Ordinance 2001:
4.3.1.1 Functions of the Controller General – The functions of the Controller General
shall be –
5 (a) to prepare and maintain the accounts of the Federation, the Provinces
and district governments in such forms and in accordance with such
methods and principles as the Auditor General may, with the approval of the
President, prescribe from time to time;
6 (b) to authorise payments and withdrawals from the Consolidated Fund and
Public Accounts of the Federal and Provincial Governments against
approved budgetary provisions after pre-audited checks as the Auditor
General may, from time to time, prescribe;
7 (c ) to prepare and maintain accounts of such organisations and authorities

established, set up or controlled by the Federation or Provinces as may be
assigned to him by the President or, as the case may be, the Governor of a
Province;
8 (d) to lay down the principles governing the internal financial control for
Government departments in consultation with the Ministry of Finance the
and Provincial Finance departments as the case may be;
9 (e) to render advice on accounting procedure for new scheme, programmes

or activities undertaken by the Government concerned; (this includes
maintenance and update of the New Accounting Model including Chart of
Accounts – However, where a change to methods and principles defined in
NAM is to be introduced, this will be updated/changed in consultation with
the Auditor General of Pakistan.);
10 (f) to submit accounts compiled by him or any other person responsible in

that behalf, after the close of each financial year, to the Auditor-General,
showing under the respective heads the annual receipts and disbursements
for the purpose of Federation and of each Province within the time-frame
prescribed by the Auditor General;
11 (g) to provide, in so far as the accounts compiled by him permit, to the

Federal Government or, as the case may be, the Provincial Government or,
District Government such information as such Governments may from time
to time require;
12 (h) develop and maintain an efficient system of pension, provident funds and
other retirement benefits in consultation with the concerned Government;

13 (i) to co-ordinate and ensure resolution of audit observation of the Audit

Department with the concerned departments; and
14 (j) to prescribe syllabus, standards and provide facilities for the training of
officers and staff under his administrative control.
14.1.1.1 Reports – From the accounts directly kept or maintained by him or by

accounts officers subordinate to him, and from the accounts kept and maintained
by other entities, including self-accounting entities (examples are given in
Schedule 1 of this Manual), the Controller General shall –
15 (a) prepare each year the appropriation and finance accounts and such other
accounts as may be prescribed by rules for submission to the Auditor
General on such dates as may be specified by him;
16 (b) prepare and submit to the Auditor General for each financial year a
Consolidated and General Financial Statement incorporating the summary
of the accounts of the Federation, all provinces and district authorities. The
Auditor General, after authentication, shall forward the same to the Federal
Government, Provincial Governments and district authorities;
17 (c ) prepare and submit to the Federal, the respective Provincial

Governments and the Auditor General, statements and summaries of
monthly or quarterly accounts on such formats as may be prescribed by
rules.
17.1.1.1 Office of the Controller General of Accounts is accountable to the

President of Pakistan.

17.2 Financial and accounting responsibilities of the Accountants-Generals’ Offices
17.2.1.1 Responsibilities of Accountants-Generals’ Offices in respect of centralised

accounting entities include:
 keeping the accounting records of their transaction
 performing pre-audit (validation) function on their payments
17.2.1.2 Other financial and accounting responsibilities of the Accountants-

Generals’ Offices include:
 preparation and submission toof the Federal, and Provincial and
District/Local Governments’ of consolidated monthly and consolidated
quarterly accounts for the Federation and for each Provincefor onward
submission to the Controller General of Accounts.
 preparation for each financial year, of half yearly and annual financial
statement of the Federal and each of , Provincial and District/Locals
Governments and the Consolidated Financial Statements of the Republic
for submission to the Auditor General of PakistanController General of
Accounts.
17.2.2.1 Accountants-General’ Offices are accountable to the Auditor-

17.2.3.1 For the Federal Government, the office of the Accountant-General of

Pakistan Revenue performs the above responsibilities with the assistance of:
 Accountant-General of Pakistan Revenue office in Islamabad
 Federal treasury office in Islamabad
 Sub-Offices of Accountant-General of Pakistan in each Province
 District Accounts Offices at district level
17.2.3.2 For the Provincial Government, Accountants-General perform the above

responsibilities with the assistance of:
 Treasuries in various locations

 District Accounts Offices at district level

17.3 Financial and accounting responsibilities of the Ministry of Finance - Finance

Division (Federal) / Department (Provincial)
17.3.1.1 Responsibilities of Finance Division/Department in respect of government

accounting of the entities other than those specified in Schedule 2 include:
 compilation and sanction of annual budgets and supplementary budgets
 advising Government on policy matters relating to the accounts and
financial matters of the Government
 monitoring overall budget performance for the Government
 prescribing detailed policies and procedures in relation to specific
accounting and financial areas eg. purchasing, insurance etc.
17.3.1.2 Other financial and accounting responsibilities include:
 management of domestic and foreign borrowing, including aid and grants
17.3.2.1 Finance Division is accountable to the Finance Minister.

17.4 Financial and accounting responsibilities of the Central Board of Revenue
17.4.1.1 Responsibilities of the Central Board of Revenue include:

 assessment and collection of Federal Government taxes
 recording and reconciliation of revenue collections
17.4.2.1 Central Board of Revenue is accountable to the Finance Minister.
17.4.3 Explanatory Note
17.4.3.1 The Central Board of Revenue is in the process of becoming a self

accounting entity. Once this has occurred the Manual of Accounting Policies
Principles will be revised accordingly. (PIFRA TO CONFIRM).

17.5 Financial and accounting responsibilities of the State Bank of Pakistan and its
agent/s
17.5.1.1 The State Bank of Pakistan and its agent, National Bank of Pakistan are
the Government’s Banker.
17.5.1.2 The responsibilities of the State Bank of Pakistan and its agent, the
National Bank of Pakistan in respect of government accounting include:
 making collections on Government account
 making disbursements on approved claims
 maintenance of records of all transactions described above
 preparation and submission of statements of transactions(in such form as
may be specified)
 managing the Government’s cash balances in accordance with the
Government’s specific instructions
 periodic reconciliations of transactions with Accountants General’s
Office and Accountant General Pakistan Revenues
 periodic reporting to Accountants General’s Office, Accountant General
Pakistan Revenues and Ministry of Finance
17.5.2.1 The State Bank of Pakistan fulfils the role of the Central Banker, having
overall responsibility for the management of the Government’s banking. The
National Bank of Pakistan takes primary responsibility for the majority of the
transaction processing of Government.

17.6 Financial and accounting responsibilities of centralised accounting entities.
17.6.1.1 The financial and accounting responsibilities of centralised accounting

entities are organised such that:
 the primary books of accounts are maintained and reported on by the
Accountants-General’s Offices
 the Accountants-Generals’ Offices perform the pre-audit function
 all other financial and accounting responsibilities remain the responsibility
of the Principal Accounting Officers
17.6.2 Determination of entities to be included in Schedule 1 & 2 of this Manual.
17.6.2.1 The Auditor-General of Pakistan in consultation with Ministry of Finance

will determine the entities to be included in Schedule 1 & 2.

17.7 Financial and accounting responsibilities of Schedule 1 entities
17.7.1.1 The financial and accounting responsibilities of Schedule 1 entities are

organised such that:
 the Head of Organisation is responsible for maintaining primary books of
accounts
 they are responsible for conducting their own pre-audit
 the entities have delegated powers and responsibilities to independently
account for expenditure and receipts, and to make their own payments
and operate their own assignment accounts
 periodic reports are prepared and submitted to the Accountants General’s
Office
17.7.2 Determination of entities to be listed in Schedule 1
17.7.2.1 The Auditor-General of Pakistan in consultation with the Ministry of

Finance will determine the entities to be included in Schedule 1.

Manual of Accounting Principles Financial and accounting responsibilities
of financial officers
18 Financial and
accounting
responsibilities of
Administrative
Financial and
Accounts Officers
Issued 17/10/98May 2005 Page 1 offafin.doc

18.1 Financial and accounting responsibilities of financial officers
18.1.1.1 The term financial officer has been used in generic sense to describe all
officers having accounting or financial responsibility.

18.2 Financial and accounting responsibilities of Principal Accounting Officers
18.2.1 Position
18.2.1.1 There will be a Principal Accounting Officer for each

Ministry/Division/Department other than entities in Schedule 1 and 2 of this
Manual. In the case of Schedule I entities the Head of Organisation will assume
the responsibilities of the Principal Accounting Officer.
18.2.2 Definition
18.2.2.1 The Principal Accounting Officer is the senior accounting officer within
the entity other than for entities in Schedule 1 and 2 of this Manual. In the case
of Schedule 1 entities the Head of Organisation will assume the responsibilities
of the Principal Accounting Officer.
18.2.3.1 Responsibilities of the Principal Accounting Officer includes:

 ensuring compliance with the Manual of Accounting Principles and
Accounting Policies and Procedures Manual and any other financial and
accounting directives issued by the Government
 application of appropriate accounting policies
 preparation and monitoring of the entity’s appropriation
 exercising delegation of financial responsibility
 authorisation and reconciliation of expenditure
 due diligence in provision of accounting information
 application of internal control within the entity
 safe custody of assets
 proper use of resources
18.2.4.1 The Principal Accounting Officer is responsible to the Minister concerned

and to the Public Accounts Committee in relation to under and over expenditure
on Budget. The head of Organisation in Schedule Accounting entities is
responsible to the Minister concerned through the Secretary of the
Ministry/Division concerned.
18.2.5.1 The Principal Accounting Officer will be the Secretary in the centralised
accounting entities and the Chief Executive Officer in the self accounting
entities. The Principal Accounting Officer may delegate to the Controlling
Officer.

18.3 Financial and accounting responsibilities of the Financial Adviser
18.3.1 Position
18.3.1.1 For each accounting entity within the Federal Government only other than
entities specified in Schedule 2 of this manual there will be assigned a
representative of the Finance Ministry who will be designated as the Financial
Adviser.
18.3.2 Definition
18.3.2.1 The Financial Adviser will be responsible for advising the Principal
Accounting Officer in the application of Government policies.
18.3.3.1 Responsibilities of Financial Adviser include:

 to provide financial advice to the Principal Accounting Officer on the
application of Government accounting policies
 to assist the Principal Accounting Officer in the scrutiny of budget
proposals and submissions
 to represent the Ministry of Finance in important assignments, projects
and matters relating to the management of that entity
18.3.4.1 The Financial Adviser is responsible accountable to the Finance Secretary
18.3.5.1 For entities that do not have their own Financial Adviser, the Financial
Adviser attached to the relevant Ministry / Division / Department will be
considered to have an office in the attached entity of that Ministry / Division /
Department.

18.4 Financial and accounting responsibilities of Finance and Accounts Officers
18.4.1 Position
18.4.1.1 For each entity other than entities specified in Schedule 2 of this manual
there will be a Finance and Accounts Officer/s.
18.4.2 Definition
18.4.2.1 The Finance and Accounts Officer will be responsible for advising the
Principal Accounting Officer on all financial, budgetary and accounting matters
and recording of financial transactions within the entity.
18.4.3.1 Responsibilities of Finance and Accounts Officers include:

 co-ordination and internal scrutiny of budget estimates
 ensuring development schemes are prepared in accordance with the
prescribed financial procedures and policies
 advising the Principal Accounting Officer on all financial, budgetary and
accounting matters related to the entity
 ensuring proper maintenance of accounting information including
reconciliation
 exercising internal checks on irregularities, waste and fraud
 ensuring application of all accounting and financial rules and regulations
issued by the Government
 co-ordination with Financial Adviser
18.4.4.1 The Finance and Accounts Officer is accountable to the Principal

Accounting Officer.

18.5 Financial and accounting responsibilities of Internal Audit Officer
18.5.1 Position
18.5.1.1 There will be an Internal Audit Officer for each centralised accounting
entity and each self accounting entity.
18.5.2 Definition
18.5.2.1 The Internal Audit Officer is responsible for reviewing the effectiveness of
systems of internal control and reports to the Principal Accounting Officer.
18.5.3.1 Responsibilities of the Internal Audit Officer include:

 auditing of major transactions within the entity
 assisting the Principal Accounting Officer in developing and maintaining a
system of internal control within that entity
 reporting compliance with the financial policies and procedures
 reporting on the proper accountability of the entity’s assets and liabilities
18.5.4.1 The Internal Audit Officer will be responsible accountable to the Principal
Accounting Officer.

18.6 Financial and accounting responsibilities of Project Director
18.6.1 Position
18.6.1.1 The Principal Accounting Officer will assign a Project Director to each
project.
18.6.2 Definition
18.6.2.1 The Project Director will be responsible for the performance and financial
and accounting function of the project to which the Project Director is assigned.
18.6.3.1 Responsibilities of the Project Director include:

 ensuring compliance with financial and accounting policies and
procedures issued by the Auditor-General and the Ministry of Finance.
 ensuring proper recording of financial transactions
 ensuring compliance with the objectives of that project
 authorisation and monitoring of expenditures
 prompt full and accurate reporting of financial information
 ensuring compliance with the limits of authorities
 furnishing the Auditor GeneralController General of Accounts with a
copy of the monthly accounts.
18.6.4.1 The Project Director is responsible accountable to the Principal

Accounting Officer of the controlling entity.

18.7 Financial and accounting responsibilities of Auditor-General of Pakistan
18.7.1 Position
18.7.1.1 As required by the Constitution of the Islamic Republic of Pakistan there

is an Auditor-General.
18.7.2 Definition
18.7.2.1 The Auditor-General is appointed by the President and performs such

functions and exercises such powers and prepares audits and submits such
reports in relation to the expenditure and accounts of the Federation, and
Provinces and Districts as may be determined by an Act of Parliament and, until
so determined, by the Presidentthe Auditor General’s (Functions, Powers and
Terms and Conditions of Service) Ordinance 2001.
18.7.3.1 Responsibilities of the Auditor-General include:

 responsibility for the audit of all transactions of the Federation and
Provinces
 reporting to the President on the accounts of the Federation and to the
Governor on the accounts of the Provincial Governments
18.7.3.2 In addition to the responsibilities outlined above in 8.7.3.1 there is a

further responsibilities for supplying information on an as required basis to the
Federal and Provincial Governments. These responsibilities include:
 keeping the accounts of the entities other than entities specified in 2 of
this manual and reporting on the accounts of the said entities.
 preparation and submission to the Auditor-General of the consolidated
General Financial Statements
 supplying the requested information to the Federal or Provincial
Governments or their representatives
 managing the workings of the Accountant-General of Pakistan Revenue
and the Provincial Accountant-Generals
 responsibility for the audit of all transactions of the Federation and
Provinces
 reporting to the President on the accounts of the Federation and to the
Provincial Governments or their representatives.Responsibilities are
detailed in Section 4.2.1.
18.7.4.1 The Auditor-General is responsible accountable to the President of

Pakistan.

18.7.5.1 The Constitution of the Islamic Republic of Pakistan states general

provisions for the terms of office of the Auditor-General and empowers
Parliament and the President to determine the terms and conditions of service,
the term of office and powers and function of the Auditor-General.

18.8 Financial and accounting responsibilities of Controller General of Accounts
18.8.1 Position
18.8.1.1 As required by the Controller General of Accounts (Appointment,

Functions and Powers) Ordinance 2001.
18.8.2 Definition
18.8.2.1 The Controller General of Accounts is appointed by the President and

performs such functions and exercises such powers and prepares such reports in
relation to the expenditure and accounts of the Federation, Provinces and
Districts as may be determined by Controller General of Accounts
(Appointment, Functions and Powers) Ordinance 2001.
 Responsibilities are detailed in Section 4.3.1.
 As detailed in Section 4.3.1.1(e), the Controller General of Accounts
shall be responsible for update and maintenance of New Accounting
Model (including the Chart of Accounts). However, where a change to
methods and principles defined in NAM is to be introduced, this will be
updated/changed in consultation with the Auditor General of Pakistan.
18.8.4.1 The Controller general of Accounts is accountable to the President of

Pakistan.
18.8.4.2 The specific terms, conditions and powers are contained in the Pakistan
(Audit and Accounts) Order 1973, issued by the President.

18.9 Financial and accounting responsibilities of Accountants-General
18.9.1 Position
18.9.1.1 For the Federation there will be an Accountant-General Pakistan

Revenues. For the Provinces there will be Accountants-General.
18.9.2 Definition
18.9.2.1 The Accountant-General is the head of an office of audit and accounts, or

of accounts. It includes Accountant-General of Pakistan Revenues, Provincial
Accountants-General, District Accounts Offices and Treasury Offices.
18.9.3.1 For all entities other than entities specified in Schedule 1 & 2 of this
Mmanual the Accountant-General is responsible for:
 keeping the accounting records of their transactions
 performing the pre-audit (validation) function on payments
 preparation and submission of civil accounts to the Federal and .
Provincial and District/Local Governments in the manner specified by the
Auditor-GeneralController General of Accounts.
 preparation and submission of annual accounts of the Federal, Provincial
and ProvincialDistrict/Local Governments to the Comptroller-
 preparation of bank reconciliation
18.9.4.1 The Accountant-General is responsible accountable to the Auditor

General of PakistanController General of Accounts.

Manual of Accounting Principles Schedule 1 - Self accounting entities
19 Schedule 1 - Self
accounting entities
Issued: May 2005 Page 1 sch1fin.doc

Manual of Accounting Principles Schedule 1 - Self accounting entities
19.1 Schedule of self accounting entities
19.1.1.1 Self accounting entities are defined in sections (as per 1.3.3.5) as any
accounting entity for whom the Principal Accounting Officer has primary
responsibility for the accounting and reporting functions (i.e. as opposed to the
Auditor General’sController General of Accounts office).
19.1.1.2 Examples of self accounting entities are:

 National Savings Organisation
 Pakistan Mint
 Food Wing of the Food and Agriculture Division
 Pakistan Public Works Department
 Ministry of Foreign Affairs
 Geological Survey of Pakistan
 Pakistan Railways
 Forest Department
 Ministry of Defence
Issued: May 2005 Page 2 sch1fin.doc

Title of Manual Chapter Name
20 Schedule 2 -
Exempt entities
Issued 3-Jun-97May 2005 Page 1 File Name

Title of Manual Chapter Name
20.1 Schedule of exempt entities
20.1.1.1 Exempt entities are defined as those which fall outside the responsibility of
the Controller General of Accounts/Auditor General of Pakistan for accounting
and reporting purposes.
20.1.1.2 Examples of exempt entities are:

 Water and Power Development Authority (WAPDA)
 Oil and Gas Development Authority Corporation Limited (OGDCLDA)
 National Highway Authority (NHA)
 National Mass Transit Authority (NMTA)
 all Government Corporations, listed companies and other entities
required to prepare reports under the Companies Ordinance, 1984.
Issued 3-Jun-97May 2005 Page 2 File Name

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Manual of Accounting Principles Table of Contents

1 OVERVIEW - PURPOSE AND SCOPE OF THE MANUAL 1.1

1.2 Structure of the Manual 1.3

1.3 Authority, applicability, distribution and maintenance of the Manual 1.4

2 ACCOUNTING CONCEPTS 2.1

2.2 Accounting Model 2.5

2.3 Internal Control 2.11

2.4 Budgeting 2.12

3 ACCOUNTING POLICIES 3.1

Issued 13-Feb-99May 2005 Page 2 Mastermap.doc

3.1.2 Accounting period 3.2

3.2 Accounting records 3.3

3.3 Accounting elements 3.5

3.4 Banking 3.11

3.5 Reporting 3.13

3.6 Inter entity transactions 3.16

4 ORGANISATION OF FINANCIAL AND ACCOUNTING RESPONSIBILITIES

4.2 Financial and accounting responsibilities of the Auditor-General’s Office 4.3

4.4 Financial and accounting responsibilities of the Accountants-Generals’ Offices 4.7

Issued 13-Feb-99May 2005 Page 3 Mastermap.doc

4.8 Financial and accounting responsibilities of centralised accounting entities. 4.11

4.9 Financial and accounting responsibilities of Schedule 1 entities 4.12

5 FINANCIAL AND ACCOUNTING RESPONSIBILITIES OF

5.2 Financial and accounting responsibilities of Principal Accounting Officers 5.3

5.3 Financial and accounting responsibilities of the Financial Adviser 5.4

5.5 Financial and accounting responsibilities of Internal Audit Officer 5.6

5.6 Financial and accounting responsibilities of Project Director 5.7

Issued 13-Feb-99May 2005 Page 4 Mastermap.doc

5.6.2 Definition 5.7

5.7 Financial and accounting responsibilities of Auditor-General of Pakistan 5.8

5.8 Financial and accounting responsibilities of Controller General of Accounts 5.9

5.9 Financial and accounting responsibilities of Accountants-General 5.10

6 SCHEDULE 1 - SELF ACCOUNTING ENTITIES 6.1

7 SCHEDULE 2 - EXEMPT ENTITIES 7.1

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Issued May 2005 Page1 overfin.doc

1.1 Purpose of the Manual

1.1.1.1 The purpose of this Manual is to:

1.1.1.5 Documents relevant to accounting and financial management of centralised

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1.2 Structure of the Manual

1.2.1.1 This Manual is in three parts.

1.2.1.5 There are two Schedules attached to this Manual.

1.2.1.5.1 Schedule 1 is a list of all self accounting entitiesdetails examples of

1.2.1.5.2 Schedule 2 is a list of all exempt entitiesdetails examples of

1.2.2 Reader guidance

Issued May 2005 Page3 overfin.doc

1.3 Authority, applicability, distribution and maintenance of the Manual

1.3.2 Effective date

Centralised accounting entities

Self accounting entities

1.3.3.7 An exempt entity is any entity defined in Schedule 2 of this Manual.

1.3.3.8 The term accounting entity excludes exempt entities.

Issued May 2005 Page4 overfin.doc

1.3.4.3 Accounting entities are not authorised to implement accounting principles in

1.3.4.4 Sections 5 4 and 6 5 covering the “Organisation of Financial and Accounting

1.3.5 Distribution, maintenance and update

1.3.5.1 The Auditor-General of Pakistan will be responsible for:

1.3.5.2 The Controller General of Accounts will be responsible for: