The National Chart of Accounts and Financial Reporting Formats

Imagine that the Federal Government, thirty-six States and 774 local government councils each coded the same transaction differently. One calls the purchase of medicines “drugs”, another “medical supplies”, a third “health materials”; one records it by ministry, another by project, a third by location.

The national totals for spending on health could not be added up, the budget could not be compared with the accounts, and a computer system could not process the data. A common chart of accounts solves this.

The National Chart of Accounts is a coding system used for both the budget and the accounts of all three tiers of government, so that every naira received or spent is described in the same way everywhere. Together with a standard format for the general purpose financial statements, it makes government accounts comparable, auditable and computable.

This topic covers the definition, objectives, features, six segments and advantages of the National Chart of Accounts; the structure of the cash basis International Public Sector Accounting Standard (IPSAS) and the statements that Nigerian governments prepare on that basis; the structure of the accrual basis statements and their line items; the differences between the two; and worked examples of a receipts and payments statement, a budget performance report and a statement of changes in net assets.

The next topic begins the study of budgeting with the purposes of the budget and the budgeting methods used in Nigeria.

The chart was tested in May Diet, 2024, Question 4 (20 marks), where part (a) (4 marks) asked for four characteristics and part (b) (12 marks) for the six structures; in May Diet, 2022, Question 1 (30 marks), where part (b) (6 marks) asked for the functional, programme and geographical segments; and in May Diet, 2026, Question 3 (20 marks), where a part (8 marks) asked for an explanation of the chart and four structures for budgeting.

Read the Treasury Single Account, the payroll and financial management systems first.

The National Chart of Accounts

The Federation Account Allocation Committee’s sub-committee developed a comprehensive, standardised National Chart of Accounts: an integrated budget and accounting classification system prepared mainly to implement a uniform accounting system that complies with IPSAS. It is a complete list of budget and accounting items, each represented uniquely by a code and grouped into tables of related data, for tracking, managing and reporting items in an orderly, efficient and transparent way.

The codes may be numeric, alphabetic or alphanumeric, and let the entity define every item of revenue, expenditure, asset, liability, location and other parameter so that interested parties understand it better.

Objectives

• to give ample opportunity for comparability;
• to unify and harmonise coding, budgeting, accounting and reporting;
• to allow global interpretation of Nigeria’s general purpose financial statements (GPFS);
• to produce nationally consistent financial reporting;
• to improve transparency and accountability; and
• to make computerisation of the accounting system easier.

Features (characteristics)

• designed after consultation with all local government councils, the States and the Federal Government, taking into account their peculiar needs;
• expandable and flexible;
• each item has a unique code;
• used for both budgeting and accounting;
• compliant with cash and accrual basis IPSAS;
• compliant with the Government Finance Statistics standard of 2001; and
• in line with the classification of the functions of government (COFOG).

The structure: six segments

Every transaction is coded across six segments. Each answers one question about it.

1. Administrative segment (who is responsible?). It assigns responsibility for each transaction to a revenue centre (a receipt) or cost centre (a payment): the ministry, department or agency.
2. Economic segment (what?). Every receipt comes from a particular source (for example a contractor registration fee) and every expense is on a particular item or object (for example purchase of drugs and medical supplies). It answers the “what” of the transaction: revenue, expenditure, assets, liabilities.
3. Functional segment (for what purpose?). It classifies expenditure by the purposes and objectives for which it is intended, following the internationally recognised classification of the functions of government: a detailed classification of the socio-economic objectives that general government units seek through outlays, such as education, social security, housing and health. It is especially useful for analysing how resources are shared among sectors. Functions and sub-functions are assigned at the point of budgeting and planning.
4. Programme segment (which activities?). It identifies the sets of activities that meet specific policy objectives, such as pre-primary education, poverty alleviation and food security.
5. Funds segment (financed by?). It answers the “financed by” element, identifying the pools of resources that finance government activities. It helps with full disclosure of government revenue, including external assistance, and speeds the implementation of IPSAS.
6. Geographic segment (where?). It records the location of the transaction so that budgets and spending can be analysed by geo-political zone, State and local government council, and so that bodies with monitoring and evaluation duties can find projects across the country.

Illustration. Suppose a State Ministry of Health buys drugs for primary health centres in Kano, paid from the Consolidated Revenue Fund. The six answers are: administrative, the Ministry of Health; economic, purchase of drugs and medical supplies; functional, health; programme, primary healthcare; fund, the Consolidated Revenue Fund; geographic, Kano State.

Another purchase of the same drugs for a hospital in Enugu would differ in the programme and geographic segments only. The two can be added or compared because everything else is coded the same way. This is a teaching illustration of how the segments combine, not a real code string.

Advantages

• It harmonises the various charts of accounts of the Federal, State and local governments into one standard chart, helping to reach the minimum reporting requirements of international best practice.
• It contains the coding of items used for classification, budgeting, accounting and reporting within the financial year.
• It facilitates the recording of all transactions and is directly linked to the general purpose financial statements.

Reporting format under cash basis IPSAS

Financial statements are a structured representation of the financial position and financial performance of an entity. General purpose financial statements meet the needs of users who cannot demand reports tailored to their needs, such as taxpayers, suppliers and employees. Cash basis statements are prepared by recognising income and expenses only when cash is received or paid.

Structure of the cash basis IPSAS

The International Public Sector Accounting Standards Board issued only one standard on the cash basis, against some forty on the accrual basis. It has two parts: mandatory requirements, applicable to all entities preparing cash basis statements and which must be met by any entity that claims to report under the cash basis IPSAS; and additional disclosures, which are encouraged and include alternative methods of presenting certain information.

Objectives

To prescribe how cash basis statements are presented; to give accountability for cash receipts, payments and balances; to give transparency about the allocation of cash resources; to help assess the entity’s ability to generate cash in future; to enhance comparability; and to provide a sound base for the move to the accrual basis.

Components

The standard’s components are the statement of cash receipts and payments, accounting policies and explanatory notes, and a comparison of budget and actual amounts. The statements prepared by the governments in Nigeria on this basis are:

• Statement of the Consolidated Revenue Fund: a statement of recurrent income and expenditure for a period; all revenue accruing to government is paid into the fund. On the move to the accrual basis it is replaced by the statement of financial performance.
• Statement of assets and liabilities: the financial position at a point in time. Assets are grouped as liquid assets and investments and other cash assets; liabilities as public funds and external and internal loans.
• Statement of the Capital Development Fund (the capital income statement): funds transferred from the Consolidated Revenue Fund and loans to finance capital projects in the period.
• Cash flow statement (receipts and payments): the sources of cash, what it was spent on and the closing cash balance, reported under operating, investing and financing activities.
• Notes to the accounts: additional information supporting the statements.
• Performance reports: a comparison of actual performance with the approved budget. Not a principal statement, but essential for users judging budget performance.
• Statistical reports: functional, programme and geographic reports, useful to certain users.
• Accounting policies: the specific principles, bases, conventions, rules and practices adopted, which must comply with each applicable IPSAS.

Other disclosures the entity makes if not given elsewhere:

• its domicile, legal form and jurisdiction
• the nature of its operations and principal activities
• the legislation governing it
• the date and authority for issue of the statements

An entity should be able to issue its statements within six months of the reporting date, though three months is strongly encouraged.

If another body can amend the statements after issue, that fact is disclosed.

A worked statement of cash receipts and payments

Performance report. The budget for revenue was ₦800m and actual ₦790m, a shortfall of ₦10m or 10 ÷ 800 = 1.25%; the budget for expenditure was ₦470m and actual ₦450m, a saving of ₦20m or 20 ÷ 470 = 4.3%. Users can see that revenue was almost on target and spending slightly under budget.

Reporting format under accrual basis IPSAS

Accrual basis statements record transactions and events when they occur, not only when cash is received or paid. IPSAS 1 covers the presentation of the statements as a whole, while other standards cover recognition, measurement and presentation of particular line items.

Differences from the cash basis

• Accrual statements recognise transactions when they occur; cash statements when cash moves.
• Accrual statements disclose tangible assets, receivables and payables; cash statements do not.
• The principal statements differ.

Components

• Statement of financial position: assets, liabilities and net assets or equity, each split into current and non-current. Current assets: cash and equivalents, receivables, inventories, prepayments, other current assets. Non-current assets: loans granted, investments, infrastructure, plant and equipment, investment property, intangible assets. Current liabilities: deposits, short-term loans and advances, unremitted deductions, accrued expenses, current portion of borrowings. Non-current liabilities: public funds and long-term borrowings. These sub-groups are the minimum on the face; assets are shown net of provisions, with detail in the notes.
• Statement of financial performance (income and expenditure): minimum line items are revenue from operating activities; surplus or deficit from operating activities; finance costs; share of surpluses or deficits of associates and joint ventures under the equity method; surplus or deficit from ordinary activities; extraordinary items; minority interest; and the net surplus or deficit. Expenses are classified by nature or by function; if by function, the nature must be given in the notes.
• Cash flow statement (IPSAS 2): operating, investing and financing activities. The direct method shows gross receipts and payments by class, with a reconciliation of the surplus to net operating cash flow; the indirect method adjusts the surplus for non-cash items such as depreciation. The standard recommends the direct method.
• Statement of changes in net assets or equity: shows why net assets (assets less liabilities) moved: changes in accounting policies, correction of prior-year errors, revaluation, surplus or deficit for the period, and currency translation.
• Notes: narrative descriptions and schedules of amounts on the face of the statements, with contingent liabilities and commitments, normally in this order: statement of compliance with IPSAS; measurement bases and accounting policies; supporting information for line items in the order they appear; and other disclosures.

Worked example. Opening net assets are ₦1,200m; the surplus for the period ₦160m; a revaluation gain on infrastructure ₦80m; and a correction of a prior-year error reduces net assets by ₦30m. Closing net assets are 1,200 + 160 + 80 − 30 = ₦1,410m.

The ideas in more depth

Why one chart for budget and accounts

A budget is a plan for the same items that the accounts later record. If the budget is coded one way and the accounts another, a ministry cannot say whether it spent what it planned except by an extra conversion, which takes time and invites error. With one chart, the actual amount posted to an item is compared with the budget for the same item automatically.

This is what makes the performance report, and the move to computerised budget execution, possible.

Why the segments matter to different users

An auditor wants the administrative and economic segments, to see who spent what. A planner wants the functional and programme segments, to see how much goes to health or education. A donor wants the fund segment, to see how its grant was used. A monitoring officer wants the geographic segment, to find the project. One chart serves each of them from the same data.

Sources and references

• The National Chart of Accounts developed by the Federation Account Allocation Committee sub-committee; the cash basis IPSAS (Financial Reporting under the Cash Basis of Accounting); IPSAS 1 and IPSAS 2; the Government Finance Statistics manual and the classification of the functions of government.

These points are stated as at 5 November 2026.

Worked examples

1. Net increase.
   340 − 160 + 30 = 210.
2. Closing.
   95 + 210 = ₦305m.

1. Percentage.
   10 ÷ 800 = 1.25%.

1. Calculate.
   1,200 + 160 + 80 − 30 = ₦1,410m.

How to answer in the exam

• For the chart, define it, then list objectives, features and the six segments, with the question each answers.
• Name the statements of each basis and say what each shows.
• Use the right basis for the statements asked: cash basis has the Consolidated Revenue Fund and the Capital Development Fund statements; accrual has financial position and performance.
• Show working for cash flow and variance calculations.

Common mistakes in the exam

• Listing only four or five segments when six are asked for.
• Confusing the functional segment (purpose) with the programme segment (activities).
• Giving the accrual statements as the cash basis statements.
• Saying that cash basis statements show receivables and tangible assets.
• Including a non-cash item such as depreciation in a cash receipts and payments statement.
• Stating that the indirect method is the one the standard recommends.

Quick revision

• Six segments: administrative, economic, functional, programme, funds, geographic.
• Cash basis: Consolidated Revenue Fund, assets and liabilities, Capital Development Fund, cash flow, notes, reports.
• Accrual: financial position, financial performance, cash flow, changes in net assets, notes.

Practice questions

These are original questions written in the style of the Institute’s exams. Try each one before you open the answer. Section A is a recall check, because the paper itself is written.

Recall check: multiple choice

Section B style: written questions

A further written question

Model answers

Spotted a mistake? Tell us and we will check it.