Government Accounting

Subject: Accountancy

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Overview

The system of accounting maintained by the government offices to keep the systematic record of revenue and expenditures of all government offices is known as government accounting. This note has information about government accounting and its historical development.
Government Accounting
Accounting
Accounting

The system of accounting maintained by the government offices to keep the systematic record of revenue and expenditures of all government offices is known as government accounting. It is the systematic and scientific process of recording, classifying and summarizing the financial transactions of the government and interpreting and communicating the result. It helps to maintain the proper record of government revenues and their proper utilization on development and administrative works. It reflects the receipt and payment position of the public funds. It helps to analyze the financial information of governmental organizations for making decisions relating to financial activities.

The following is the main definition of government accounting:

“Government Accounting is the process of recording, analyzing, classifying, summarizing, communicating and interpreting financial 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

Historical development of government accounting

Government accounting in Nepal can be traced back to the Lichhavi period. It was first introduced in Nepal in Lichhavi period to record the revenues and expenditures of the government. In Lichhavi period, there was certain for accounting to record financial transactions. In this period, government revenues were collected from the trust, tax, and customs duty and expenditures were made for war, renovation and construction of temples. When the trade and industry further developed in Malla period, the sources of government revenue were increased. When the number of financial transactions increased in Shah Period, it was necessary to originate the systematic accounting system. Finally, in 1871 BS, a book called Laldhadda was introduced,another book called Mothdhadda was introduced for recording details about the land and its revenue.

In 1925 BS, Kitabkhana was established to make the record of salary paid to the government employees. Kharidar Gunawanta who propounded Syaha Sresta Pranali in 1936 BS made an important contribution. In 2008 BS, Budget system was developed. Under the constitution of Nepal 2015 BS, on 2016 Ashadh 16, the Auditor General was appointed as a constitutional body. The main objective of the appointment of the Auditor General was to maintain systematic accounting and to avoid frauds and misappropriation of government fund. In 2016 BS, The Procedural Rule for Government Fund Expenditure Act 2016 was enacted in order to maintain the uniformity in financial administration. In 2017 BS, Bhuktani Sresta Pranali was introduced. Bhuktani Sresta Pranali did not last long in practice and new accounting system was introduced in 2018 BS, which was based on the double-entry book-keeping system. This system has been followed by the government of Nepal since the fiscal year 2019/ 20 BS which is still in practice in Nepal.

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).

Things to remember
  • Government accounting is the system of accounting maintained by the government offices to keep the systematic record of revenue and expenditures of all government offices. It is the process collecting, recording, classifying, summarizing, interpreting and communicating the financial information of all government transactions.
  • In 1925 BS, Kitabkhana was established to make the record of salary paid to the government employees.
  • Kharidar Gunawanta who propounded Syaha Sresta Pranali in 1936 BS made an important contribution. 
  • In 2016 BS, The Procedural Rule for Government Fund Expenditure Act 2016 was enacted in order to maintain the uniformity in financial administration.
  • In 2017 BS, Bhuktani Sresta Pranali was introduced. Bhuktani Sresta Pranali did not last long in practice and new accounting system was introduced in 2018 BS, which was based on double-entry book-keeping system.
  • It includes every relationship which established among the people.
  • There can be more than one community in a society. Community smaller than society.
  • It is a network of social relationships which cannot see or touched.
  • common interests and common objectives are not necessary for society.
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Questions and Answers

The system of accounting maintained by the government offices to keep the systematic record of revenue and expenditures of all government offices is known as government accounting.

The system of accounting maintained by the government offices to keep the systematic record of revenue and expenditures of all government offices is known as government accounting. It helps to maintain the proper record of government revenues and their proper utilization on development and administrative works. It reflects the receipt and payment position of the public funds.

According toOshisami and Dean,“Government Accounting is the process of recording, analyzing, classifying, summarizing, communicating and interpreting financial information about government in aggregate and in detail, reflecting all transactions involving the receipts, transfer and disposition of government funds and property.”

From the above definition, it is clear that government accountingis systematic and scientific process of recording, classifying and summarizing the financial transactions of the government and interpreting and communicating the result thereof. It helps to analyze the financial information of governmental organizations for making decisions relating to financial activities.

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).

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