Government accounting refers to the process of recording and the management of all financial transactions incurred by the government which includes its income and expenditures. Various governmental accounting systems are used by various

public sector The public sector, also called the state sector, is the part of the economy composed of both public services and public enterprises. Public sectors include the public goods and governmental services such as the military, law enforcement, infra ...

entities. In the

United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territo ...

, for instance, there are two levels of government which follow different accounting standards set forth by independent, private sector boards. At the federal level, the

Federal Accounting Standards Advisory Board The Federal Accounting Standards Advisory Board (FASAB) is a United States federal advisory committee whose mission is to improve federal financial reporting through issuing federal financial accounting standards and providing guidance after c ...

(FASAB) sets forth the accounting standards to follow. Similarly, there is the

Governmental Accounting Standards Board The Governmental Accounting Standards Board (GASB) is the source of generally accepted accounting principles (GAAP) used by state and local governments in the United States. As with most of the entities involved in creating GAAP in the United Stat ...

(GASB) for state and local level government.

Public vs. private accounting

Objectives

The unique objectives of government accounting do not preclude the use of the double entry accounting system. There can, however, be other significant differences with private sector accounting practices, especially those that are intended to arrive at a net income result. The objectives for which government entities apply accountancy that can be organized in two main categories: - The accounting of activities for accountability purposes. In other words, the representatives of the public, and officials appointed by them, must be accountable to the public for powers and tasks delegated. The public, who have no other choice but to delegate, are in a position that differs significantly from that of shareholders and therefore need financial information, to be supplied by accounting systems, that is applicable and relevant to them and their purposes. - Decision-making purposes. The relevant role-players, especially officials and representatives, need financial information that is accounted, organized and presented for the objectives of their decision-making. These objectives bear, in many instances, no relation to net income results but are rather about service delivery and efficiency. The taxpayer, a very significant group, simply wants to pay as little as possible taxes for the essential services for which money is being coerced by law. Sources (not directly quoted but used in synthesis): 1. Conradie, J.M. The applicability of Generally Accepted Accounting Practice in the Central Government of South Africa (English summary of a thesis written in another language) University of Pretoria, 1993. 2. Conradie, J.M. Die toepaslikheid van Algemeen Aanvaarde Rekeningkundige Praktyk in die Sentrale Owerheid van Suid-Afrika. Universiteit van Pretoria, 1993. (Original full text of the summary.)

Public vs. private accounting

Objectives

See also