Meaning of Government Accounting
Government accounting is a special branch of accounting that is concerned with the management and administration of all financial activities of government. It is one which collects, classify, record, summarize, and interpret all financial transactions comprising of revenues and expenditures of public offices.
Government accounting is an important tool available with the government for keeping a complete track record of all its funds i.e. from where they are coming and where they are going. It is a single entry system of accounting where there is no need for cross-checking of records as the government does not perform for making profits.
Features of Government Accounting
- Double Entry System: Government accounting is the most systematic type of accounting that follows principles of double-entry system of bookkeeping. Every financial transaction recorded under this accounting system has dual effects. One aspect of transaction is debited while the other one is credited for every transaction taking place.
- Government Regulations: This system of accounting is maintained as per the rules and regulations of government. Government accounting is determined by financial policies and rules of government.
- Do not reveal profit and loss: Government accounting system is not meant for revealing profit and loss out of government activities. Every government is a public institution whose main purpose is not to make profits but to maintain law and order in the country. This accounting system properly reveals how public funds and properties are utilized for development of economy.
- Banking Transactions: A government does all its transaction via the medium of banking institutions. For the purpose of performing all banking transactions of government accounting, a separate bank account is opened.
- Budgetary Control: Another important feature provided by government accounting is that it facilitates budgetary control. It is must that government expenditures remain within the budgeted amount as no government can spend more than their budgeted amount.
- Auditing: All the books of accounts maintained by government need to be audited by concerned department of government. Auditing removes any chance of misappropriation and misuse of government revenues and expenditures.
Objectives of Government Accounting
- Systematic record of financial transactions: The primary objective of government accounting is to maintain a systematic record of financial transactions of government offices. All revenues and expenditures are recorded on a daily basis that avoids any confusion or misuse of financial resources of government. Government accountants use distinct heads and sub-heads for classifying components of revenues and expenditure that leads to better understanding and presentation of financial data.
- Fair picture of distinct funds: Government accounts present a fair picture of various funds created by it from time to time. It enables in verifying whether funds are utilized efficiently for the purpose for which they were created. All records of transactions related to government created funds are systematically maintained in book of accounts. The government can easily at any point of time evaluate the allocation of its funds among various means.
- Prevents expenditures beyond budgeted limits: Government is supposed to keep its expenditures within the budgeted limits. This accounting system help government in avoiding the excess of expenditures over their revenues. It monitors the movement of funds and record all financial transactions. Over-expenditure or under-expenditure situations are unfavorable and represent inefficiency by government. Therefore, government accounting enables in analyzing the cases and taking corrective actions for overcoming them.
- Safeguard of government properties: It is one of the important objective of government accounting. A large amount of funds is deployed for purchasing both consumable and non-consumable items by government. Government accounting maintains a complete track record of all these items in a systematic manner which avoids any misuse by dishonest staff working in offices.
- Assist in annual report preparation: Government accounting help in preparation of annual reports by supplying all relevant information. Various reports are required by government for accessing whether all development works are progressing smoothly or not. These reports reveal information about types of inventories or stock, monthly expenditures, position of funds, details about release of budget etc. All this facilitates in preparation of annual reports by government in a timely manner.
- Simplify the auditing work: Auditing process involves verifying the authenticity of the book of accounts by an independent person called auditor. It aims at avoiding any frauds and errors within the organization. When accounts are prepared and maintained by government offices in a systematic manner, work of an auditor becomes easy which also minimizes the auditing cost for organization.