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+THIS MEANS THAT, UNLIKE THE NORMAL ACCOUNTING PRACTICE IN THE PRIVATE SECTOR, THERE ARE NO ACCOUNTS PAYABLE NOR ACCOUNTS RECEIVABLE IN THE GOVERNMENT ACCOUNTING PROCESS. AS A RESULT, ANY SURPLUS OR DEFICIT AT YEAR END DOES NOT NECESSARILY REFLECT THE TRUE DIFFERENTIAL POSITION OF REVENUE AND EXPENDITURE DURING THE YEAR.+
TO TAKE THE 1975-76 ACCOUNT AS A CASE IN POINT, DR. CHUNG EXPLAINED THAT THE FINANCIAL SECRETARY ESTIMATED A MONTH AGO THAT THERE WOULD BE A DEFICIT OF $50 MILLION WHICH WAS LESS THAN ONE PER CENT OF THE TOTAL EXPENDITURE.
+ IF A PROPER ACCOUNTING SYSTEM SHOWING BOTH ACCOUNTS PAYABLE AND RECEIVABLE WERE USED BY THE GOVERNMENT, THIS $50 MILLION DEFICIT COULD QUITE POSSIBLY BECOME $50 MILLION SURPLUS.
+THEREFORE, WE SHOULD NOT PUT TOO MUCH EMPHASIS ON THE SWING OF A SMALL SURPLUS OR DEFICIT FROM YEAR TO YEAR. ON THE OTHER HAND, IF THERE WERE CONSISTENTLY TO BE A LARGE SURPLUS OR DEFICIT FOR A NUMBER OF YEARS, THE TREND CANNOT BE IGNORED, HE ADDED.
TOUCHING ON BUDGETARY STRATEGY, DR. CHUNG REFERRED TO A GRAPH HE HAD PREPARED, SHOWING THE TOTAL EXPENDITURE AND RECURRENT EXPENDITURE AS WELL AS CAPITAL EXPENDITURE FROM 1965-66 TO 1975-76.
FROM THE GRAPH, HE OBSERVED THAT THE ANNUAL GROWTH RATES FOR BOTH TOTAL EXPENDITURE AND RECURRENT EXPENDITURE WERE PRACTICALLY EQUAL — ONE WAS 16.4 PER CENT AND THE OTHER 16.9 PER CENT AND THEREFORE THE TWO TREND LINES WERE ALMOST PARALLEL.
HE EXPLAINED THAT AS THE GRAPH WAS PLOTTED ON SEMI-LOGARITHMIC PAPER, THE PARALLEL TREND LINES MEANT THAT, ON THE AVERAGE, THE RATIO OF CAPITAL TO RECURRENT EXPENDITURES HAD BEEN CONSTANT THROUGHOUT THE PAST 11 YEARS AT ABOUT 42 PER CENT.
OR, RECURRENT EXPENDITURE DURING THE PAST 10 TO 12 YEARS WAS ABOUT 70 PER CENT OF TOTAL EXPENDITURE. HENCE, THE PROPOSED 1976-77 BUDGET GIVING A RECURRENT EXPENDITURE OF $5,289 MILLION AND A TOTAL EXPENDITURE OF $7,212 MILLION A RATIO OF 73 PER CENT WAS VERY CLOSE TO THE 70 PER CENT AS REVEALED BY THE TWO TREND LINES ON THE GRAPH.
HOWEVER, FOR THE ESTIMATED EXPENDITURE DURING THE FORECAST PERIOD FROM 1977-78 TO 1979-80, DR. CHUNG SAID THE RANGE OF TOTAL AND RECURRENT EXPENDITURĖS TENDED TO DEVIATE FROM THE TREND LINES.
IN OTHER WORDS, THERE WAS INDICATION THAT THE GROWTH IN EXPENDITURE DURING THE FORECAST PERIOD WOULD BE SLOWER THAN THE HISTORICAL AVERAGE.
+NEVERTHELESS, ON FURTHER EXAMINATION, THIS IS NOT NECESSARILY TRUE, AS ALL FIGURES FOR THE FORECAST PERIÓD ARE NET PRESENT VALUES (THAT IS, AT APRIL 1976 PRICES) AND IT IS NECESSARY TO CORRECT THEM FOR PRICE INFLATION.+
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