• Budgetary Emphasis: Public sector accounting places a significant emphasis on the budgeting process, as governments operate based on approved budgets.
• Fund Accounting: Public sector entities often use fund accounting to track and manage resources separately for various purposes, ensuring transparency and accountability.
• Public Accountability: Public sector accounting is designed to meet the needs of the public and demonstrate accountability for the use of public funds.
• Legal Compliance: Public sector accounting adheres to specific legal and regulatory frameworks, ensuring compliance with laws governing public finances.
• Non-profit Nature: Public sector entities operate for the public interest and are not driven by profit motives, leading to different accounting objectives compared to private entities.
• Stability over Profitability: Public sector accounting focuses on stability, economic development, and social welfare, rather than maximizing profits as in the private sector.
• Long-Term Perspective: Public sector accounting often considers long-term benefits and sustainability, as opposed to short-term profit maximization in the private sector.
• Performance Measurement: Public sector accounting includes performance measurement metrics that go beyond financial indicators, assessing the effectiveness and efficiency of public services.
• Separation of Powers: Public sector accounting recognizes the separation of powers, with different entities responsible for budgeting, spending, and auditing to prevent misuse of public funds.
• Inter-Governmental Relations: Public sector accounting often involves coordination and collaboration between different levels of government, requiring specialized accounting practices.

W1

(i) Income statement for the year ended 31 August 2015.

(ii) Statement of financial position as at 31 August 2015.

Current Ratio = Current Assets / Current Liabilities

This ratio indicates the company's ability to meet its short-term obligations. A ratio above 1 suggests that the company has more current assets than current liabilities, which is generally considered a positive sign. However, a very high current ratio may indicate an inefficient use of resources.

2. Quick Ratio (Acid-Test Ratio)

The quick ratio, also known as the acid-test ratio, is a more stringent liquidity measure than the current ratio. It excludes inventory from current assets, as inventory may not be as easily convertible to cash in the short term. The formula for the quick ratio is:

Quick Ratio = (Current Assets - Inventory) / Current Liabilities

A quick ratio higher than 1 indicates that the company can cover its short-term obligations without relying on the sale of inventory. This ratio provides a more conservative view of a company's liquidity position and its ability to meet immediate financial needs.

(ii) Statement of financial position as at 31 May 2015.

2. Faithful Representation

Faithful representation ensures that financial information faithfully represents the economic phenomena it purports to represent. This characteristic requires information to be complete, neutral, and free from material error. Users should be able to rely on the information as a faithful representation of the entity's financial position, performance, and cash flows.

3. Comparability

Comparability allows users to identify and understand similarities and differences between items in financial statements. Consistent application of accounting policies over time enhances comparability. It enables users to analyze trends, make comparisons across different entities, and evaluate the financial performance and position of an entity over multiple periods.

4. Understandability

Understandability is the quality of financial information that allows users to comprehend its meaning. Information should be presented in a clear, concise, and organized manner, considering the needs of users who have a reasonable understanding of business and economic activities. Clear communication facilitates effective decision-making.

5. Verifiability

Verifiability is the extent to which different knowledgeable and independent observers can reach a consensus that the information faithfully represents the economic reality. Information with high verifiability enhances the credibility and reliability of financial reporting, as it can be confirmed by multiple parties through the use of supporting evidence.

6. Timeliness

Timeliness ensures that financial information is available to users in a timely manner, allowing them to make decisions based on current and relevant data. Delays in reporting may reduce the information's relevance and its ability to influence user decisions.

7. Neutrality

Neutrality requires financial information to be free from bias and impartial. It ensures that the preparation and presentation of financial information are not influenced by the desire to achieve a particular outcome or to favor certain stakeholders. Neutral information enhances the credibility and objectivity of financial reporting.

1. Error of Omission: When a transaction is completely omitted from the accounting records, it will not impact the trial balance since there is no entry for it.
2. Error of Commission: Incorrect recording of amounts, such as posting a wrong figure or entering a transaction in the wrong account, may not be detected by the trial balance if the errors offset each other.
3. Error of Principle: Misapplication of accounting principles, like capitalizing an expense or treating a revenue item as a capital item, may not affect the trial balance since debits and credits are still in balance.
4. Compensating Errors: If there are errors that offset each other in terms of amount and direction (one understated, and the other overstated), the trial balance may still balance, giving a false sense of accuracy.

1. Purpose and Focus

Income and Expenditure Account: This account focuses on the organization's operating activities and reports the surplus or deficit of income over expenditure during a specific period. It resembles the profit and loss account used by for-profit entities but is adapted for the not-for-profit sector.

Receipts and Payment Account: This account primarily records the cash transactions of the organization, including cash receipts and cash payments. It provides a summary of cash flows and the cash position but does not consider non-cash items like depreciation or accrued income.

2. Accrual Basis vs. Cash Basis

Income and Expenditure Account: Prepared on an accrual basis, it recognizes income and expenses when they are earned or incurred, regardless of when the cash is received or paid. This ensures a more comprehensive view of the organization's financial performance.

Receipts and Payment Account: Prepared on a cash basis, it only considers actual cash transactions, ignoring accruals. This makes it simpler and more focused on the organization's cash position at a specific point in time.

3. Non-Cash Items

Income and Expenditure Account: Includes non-cash items such as depreciation and accrued income. These items are essential for a more accurate representation of the organization's financial performance.

Receipts and Payment Account: Excludes non-cash items. It is mainly concerned with actual cash movements and does not account for items like depreciation that don't involve cash transactions.

4. Period Covered

Income and Expenditure Account: Covers a specific accounting period, typically a year. It reflects the organization's financial performance over that period.

Receipts and Payment Account: Usually prepared for a shorter period, summarizing cash transactions over a specific time frame, often coinciding with the organization's fiscal year.

1. Cash and Cash Equivalents

These are highly liquid assets that can be quickly converted to known amounts of cash with minimal risk of changes in value. Examples include cash on hand, demand deposits, and short-term money market instruments.

2. Marketable Securities

Marketable securities are short-term financial instruments that can be easily bought or sold in the financial markets. Examples include Treasury bills, commercial paper, and short-term government bonds.

3. Accounts Receivable

Accounts receivable represent amounts owed to a business by its customers for goods or services provided on credit. These are considered as assets until they are collected.

4. Loans and Advances

Loans and advances are financial assets where one party lends money to another, expecting repayment with interest over a specified period. This category includes bank loans, mortgages, and other forms of credit.

5. Equity Securities

Equity securities represent ownership in a company and include common stock and preferred stock. Investors holding equity securities become partial owners of the issuing company and may receive dividends or capital appreciation.

6. Derivatives

Derivatives are financial contracts whose value is derived from the value of an underlying asset, index, or rate. Examples include options, futures, and swaps. Derivatives are used for risk management or speculative purposes.

7. Fixed-Income Securities

Fixed-income securities, also known as debt securities, represent loans made by an investor to a borrower (usually a government or corporation). Examples include bonds, debentures, and certificates of deposit.

8. Real Assets

Real assets include tangible assets with intrinsic value, such as real estate, commodities, and infrastructure. These assets provide a hedge against inflation and can offer diversification benefits.

(ii) Purchases ledger control account.