, pub-6663105814926378, DIRECT, f08c47fec0942fa0 Government Accounting: Characteristics and Objectives 4289

Government Accounting: Characteristics and Objectives

The government accounting is the process of filing, analyze, classify, synthesize, communicate and interpret financial information on the government as a whole. It refers to the field of accounting that finds its application specifically in the public sector or government.

Government accounting reflects in detail the transactions and other economic events that involve the receipt, expense, transfer, usability and disposition of assets and liabilities.

The characteristics of the government accounting system (eg, the basis of accounting, the nature of financial statements) should be tailored to the needs and capabilities of users.

An accounting system could be very good when compared to international accounting standards, but it could be of limited value to the country in question if there were few people familiar with these standards.

Government accounting entities are spread throughout the country, from the capital to the most remote places. Given that margin, the capacity of accounting entities and their staff will vary considerably.

Characteristics of Government Accounting
In order to ensure proper accounting for a wide range of entities, a government accounting system must be:

- Relatively uniform.

- Well documented.

- Simple to learn and operate.

- Easy to consolidate.

Components (edit)
A government accounting system typically has eight main components:

- Documents that provide evidence of transactions.

- Bank accounts through which payments and collections are handled.

- Accounting records (cash book, accounting books, etc.).

- Procedures and controls.

- A means to be able to add accounting data.

- Internal accounting reports.

- External accounting reports (financial statements).

- People who work with the system.

Difference from private sector accounting
The objectives of federal, state, or municipal government agencies in applying accounting principles are different from the primary business objective of the private sector, which is to make a profit.

Budgets are one of the most important concerns in government accounting, since government agencies are fiscally responsible to taxpayers and must demonstrate compliance with the use of resources as planned in the budgets.

In the private sector, the budget is a tool for financial planning, and therefore it is not mandatory to comply with it.

The government accounting system has an approach to measurement that is different from that of private sector accounting.

Instead of measuring the flow of financial resources, government accounting measures the flow of financial resources.

Instead of recognizing income when it is earned and expenses when it is incurred, income is recognized when money is available to settle liabilities within the current accounting period, and expenses are recognized when current resources are exhausted.

A fund is an accounting entity with a set of accounts, which is used to record financial resources and liabilities, as well as operating activities. This is the most common form of government accounting in most countries.

By dividing the resources into multiple funds, the government can more closely monitor the use of the resources. This minimizes the risk of overspending or spending in areas not authorized by a government budget.

Government funds are focused on current financial resources. This means assets that can be converted to cash and liabilities that will be paid for with that cash.

Government fund balances do not include long-term assets, or any other asset that is not converted to cash to settle short-term liabilities.

Similarly, these balance sheets will not contain any long-term liabilities, since the use of current financial resources is not required for their settlement. This measurement approach is only used in government accounting.

- Record financial transactions of income and expenses related to government organizations.

- Carrying out the government's financial business in a timely, efficient and reliable manner (for example, making payments, settling liabilities, collecting amounts owed, buying and selling assets, etc.) subject to the necessary financial controls.

- Maintain systematically and with easy access all accounting and documentary records, such as evidence of past transactions and current financial status, so that transactions can be identified and tracked in detail.

- Provide periodic and reliable financial statements that contain financial information duly classified on the operation of the public fund, as a basis for its management and accountability, and for decision-making.

- Maintain adequate financial records for budgetary control, internal control and the needs of the auditors.

- Provide the means for effective management of government assets, liabilities, expenses and income.

- Carry out expenses in accordance with the appropriate government legal regulations and provisions.

- Avoid overspending beyond the budget limit approved by the government.

- Facilitate the estimation of the annual budget by providing historical financial data of government income and expenditures.

Accounting of activities for accountability purposes
Government representatives, and officials appointed by them, must be accountable to the public for the delegated powers and tasks.

The public, who have no choice but to delegate, find themselves in a position that differs significantly from that of the shareholders. Therefore, you need financial information, which must be provided by accounting systems, that is applicable and relevant to them and their purposes.

Government accounting maintains strict control of resources. Likewise, it divides the activities into different funds to clarify how resources are being channeled to various programs.

This accounting approach is used by all types of government entities, including federal, state, municipal, and special-purpose entities.

Decision making
Relevant stakeholders, especially officials and representatives, need financial information accounted for, organized and presented for the purposes of their decision-making.

These goals have nothing to do with net income results, but rather refer to service delivery and efficiency.

The taxpayer simply wants to pay as little tax as possible for essential services for which the law requires to collect money.

Expense control
Government accounting requires the executive to indicate the amount, nature, and purpose of the planned expense. It also requires the necessary taxes to finance it

It also requires the executive to request and obtain the approval of the legislature, and to comply with the custody and granting of expenses approved by the legislator, demonstrating such compliance.

Under government accounting, the legislature can direct and also control government behavior.

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