Note on Introduction to Government Accounting

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The accounting system which is followed by government offices is known as government accounting. Government account is the systematic and scientific process of recording, collecting, classifying and summarizing the financial transaction of the government offices. It helps to analyze the sources of government revenue as well as its utilization on administrative and development works. it also maintains the proper record of government revenues and they're all implementation of development and administrative works.

"Governmental Accounting is the process of recording, analyzing, classifying, summarizing, communicating, and interpreting information about government in aggregate and in detail, reflecting all transactions involving the receipts, transfer, and disposition of government funds and property." - Oshisami and Dean

By the given definition, it is clear that the government account is the systematic and scientific process of recording, presenting, analyzing, summarizing, classifying and communicating the financial transaction of the government offices. It is concerned with keeping a record of government revenue and their proper utilization in different development and administration work. It presents the receipt and payment position of the public fund.

Features of Government Accounting:

  1. Profit and Loss: Government accounting does not reveal profit and loss of government organization. Its aim is not to determine operating result of the organization.
  2. Government regulations: Government accounting is maintained as per the government rules and regulations.
  3. Double entry system: It is based on the principles and assumptions of double entry system of book-keeping.
  4. Budget heads: All the expenditures of government offices are classified into different budget heads and expenditure are made on approved budget heads.
  5. Controlling budget: Government accounting facilitates the public administration for controlling the budget expenditures. All the records of public revenues and expenditures are made as per the specific directives, policies and principles and hence the effective controlling of the budget is possible.
  6. Auditing: The concerned department of the government must audit the books of accounts so as to avoid misuse and misappropriation of public funds.

Objectives of Government Accounting:

  1. To record financial transactions of revenues and expenditure relating to the government organizations.
  2. To avoid the excess expenditures beyond the limit of the budget approved by the government.
  3. To facilitate for making auditing.
  4. To help to prepare different financial statements and reports.
  5. To facilitate for estimating the annual budget by providing historical financial data of government and expenditures.
  6. To prevent misappropriation of government properties by maintaining the systematic records of cash and store items.
  7. To make expenditure according to the appropriate act, rules, and legal provisions.

Differences between Government Accounting and Commercial Accounting

Bases of difference

Commercial Accounting

Government Accounting

Meaning

The accounting system maintained by the business organization is called commercial accounting.

The accounting system maintained by government organization is called government accounting.

Objective

It is maintained by business offices to know the profit and loss and financial position of the business.

It is maintained by government offices to know the position of public funds.

Budget

It does not follow the government budgeting system.

It strictly follows the government budgeting system.

Auditing

A professional auditor who has a license of the audit can audit independently the books of accounts kept under commercial accounting.

A constitutional body audits books of accounts kept under government accounting.

Basis

It is prepared on the basis of cash as well as accrual.

It is prepared on a cash basis.

The level of Accounting

It does not divide the accounting system.

It has the system of the central level and operating level accounting.

Information

It provides information to the concerned parties about the operating result and financial position of the business.

It provides the information to the government about receipts, transfer, and disposition of public funds.s

  • The accounting system which is followed by government offices is known as government accounting. 
  • Government account is the systematic and scientific process of recording, presenting, analyzing, summarizing, classifying and communicating the financial transaction of the government  offices.
  • It maintains the proper record of government revenues and they're all implementation of development and administrative works.
.

Very Short Questions

The following are the main differences between government accounting and business accounting:

Government Accounting

Business Accounting

It is maintained by government offices.

It is maintained by the business organization.

Its main purpose is to disclose the information about receipt and utilization of the public fund.

Its main purpose is to know the profit or loss and financial condition of the business firm.

It is maintained on the cash basis.

It is maintained on cash as well as accrual basis

Its books of account are audited by the office of auditor general.

Its books of account are audited by the professional auditor having a license.

It classifies the accounting into central level & operating level.

It has no classification of the accounting system.

It follows the budget prepared by the government.

It prepares and follows its own internal budget.

It provides information to the government about the receipts, transfer, and disposition of public funds.

It provides information to the concerned parties about the operating result and financial position of the business.

It is strictly maintained by following the financial rules and provisions of government.

It is maintained by following the rules and principles of Generally Accepted Accounting Principles (GAAP).

The following are the main objectives of government accounting:

  1. To record financial transactions of revenues and expenditure relating to the government organizations.
  2. To avoid the excess expenditures beyond the limit of the budget approved by the government.
  3. To facilitate for making auditing.
  4. To help to prepare different financial statements and reports.
  5. To facilitate for estimating the annual budget by providing historical financial data of government and expenditures.
  6. To prevent misappropriation of government properties by maintaining the systematic records of cash and store items.
  7. To make expenditure according to the appropriate act, rules, and legal provisions.

The following are the features of government accounting:

  1. Profit and Loss: Government accounting does not reveal profit and loss of government organization. Its aim is not to determine operating result of the organization.
  2. Government regulations: Government accounting is maintained as per the government rules and regulations.
  3. Double entry system: It is based on the principles and assumptions of double entry system of book-keeping.
  4. Budget heads: All the expenditures of government offices are classified into different budget heads and expenditure are made on approved budget heads.
  5. Controlling budget: Government accounting facilitates the public administration for controlling the budget expenditures. All the records of public revenues and expenditures are made as per the specific directives, policies and principles and hence the effective controlling of the budget is possible.
  6. Auditing: The concerned department of the government must audit the books of accounts so as to avoid misuse and misappropriation of public funds.

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  • Which one of them has the main purpose is to know the profit or loss and financial condition of the business firm?

    All the options are correct


    Business accounting


    Government accounting


    New accounting system


  • Which one of them follows the budget prepared by the government?

    Business accounting


    Profit accounting


    Government accounting


    Social accounting


  • The government accounting system largely depends upon the ______.

    position of public funds


    volume of financial transactions


    all the options are correct


    rules and provisions of the government


  • Government accounting was first introduced in Nepal in ______.

    Rana period


    Shah Period


    Lichhavi period


    Malla period


  • The budgeting system was started Nepal in ______.

    2046 B.S.


    2008 B.S.


    2007 B.S.


    1871 B.S.


  • How many types of accounting systems have been used in Nepal?

    5


    3


    4


    2


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