Principles of Government Accounting
The basic principles of government account are as discussed in points given below: –
- System of Accounting: Government accounting generally follows a single-entry system of accounting for recording of transactions. But it also follows double entry accounting system for some matters i.e., loans and borrowings in order to ascertain the arithmetical accuracy by preparation of trial balance. In addition to this, double entry accounting system enables in determining the balance of account as well.
- Commercial enterprises under Public sector: Double entry system of accounting is implemented under the mercantile basis such as commercial accounting in case of public sector enterprises. A profit & loss account and balance sheet is needs to be prepared for ascertaining the results of undertaking. However, in many cases distinct techniques of management such as funds flow analysis, cash flow analysis, ratio analysis and charts and diagrams along with statistical data are considered.
- Classification of Incomes and Expenditures: Government need to classify their income and expenditure from the services under distinct heads and sub-heads.
Revenue of government is classified into: Tax revenue and Non-tax revenue.
Tax revenue is further sub-classified into: –
- Taxes on incomes and expenditures
- Taxes on services and commodities
- Taxes on capital transactions and property
Non-tax revenue is again sub-divided into: –
- Interest receipts
- Profits and Dividend;
Also, expenditure of government in form of distinct services is classified under various heads and sub-heads as given below: –
- General Services
- Economic Services
- Social Services
- Grant-in-aid and contribution
General services are also sub-classified as: Defense services, Servicing of debts, Fiscal services and Administrative services.
- Consolidated Transactions: All the transactions in government accounting are finally consolidated in proper order for showing combined result for particular period after primarily recording them under distinct head of accounts.