Government Accounting

Accounting is an important function of any business. Knowing when and where your money is
coming and going is crucial. Without that knowledge, it's impossible to know who or what got
paid or needs to be paid. In the business world, also know as the private sector, this is pretty
straight forward. In government, or the public sector, revenue streams function a little bit
differently.
The majority of all governmental agencies are funded at some level by funds received from
various taxes or grants. As government agencies are viewed as stewards of taxpayer money,
there's a need for transparency in the way in which financial data is reported. Sometimes
these funding sources are delayed or come from sources that have limitations on what they
can be spent or used on.

Accounting Principles & Regulations

Because government agencies serve as stewards of taxpayer money, using the money to
provide valuable services and goods to the public, there's a need for both uniformity and
transparency in the way in which financial data is reported. In order to establish uniformity in
their accounting processes, government agencies follow what's referred to as generally
accepted accounting principles, or GAAP for short.
These principles serve as the basis for the rules and regulations put for to establish uniform
accounting procedures in government. Having a uniform method to which financial data is
reported allows agencies to show that they're functioning as good stewards of taxpayer
dollars. The Government Accounting Standards Board, or GASB for short, is an independent,
non-political entity that helps governments report their finances in a transparent manner by
establishing and providing oversight for GAAP.

Fund Accounting
Among the basic principles of governmental GAAP is fund accounting. This is the most
common form of government accounting in the United States. It's used at the federal, state,
and local level. Governmental operations, by nature, are diverse and there are numerous legal
and fiscal constraints under which those operations must be conducted. This makes it
impossible to record all governmental financial transactions and balances in a single
accounting entity. Therefore, unlike the private sector where most transactions are accounted

for as a single entity, a governmental unit is accounted for through separate funds, each of
which is a fiscal and accounting entity with a self-balancing set of accounts.
Per GAAP, there are three generic categories of funds: governmental funds, proprietary funds,
and fiduciary funds. Government funds are associated with funding received from legislative
sources, such as tax revenue or appropriations. Proprietary funds are those funds which the
agency collects itself through services or usage fees. Examples of fiduciary funds would be
pensions and retirement investments.

Financial Reporting
It's important for government agencies to be able to accurately report their finances. Not just
because it's a good business practice, but as we mentioned before, as stewards of taxpayer
money, the public wants to know that the money is being spent correctly.

Scope of Accounting:
Accounting has got a very wide scope and area of application. Its use is not confined to
the business world alone, but spread over in all the spheres of the society and in all
professions. Now-a-days, in any social institution or professional activity, whether that is
profit earning or not, financial transactions must take place. So there arises the need for
recording and summarizing these transactions when they occur and the necessity of
finding out the net result of the same after the expiry of a certain fixed period. Besides,
the is also the need for interpretation and communication of those information to the
appropriate persons. Only accounting use can help overcome these problems.
In the modern world, accounting system is practiced no only in all the business
institutions but also in many non-trading institutions like Schools, Colleges, Hospitals,
Charitable Trust Clubs, Co-operative Society etc.and also Government and Local SelfGovernment in the form of Municipality, Panchayat.The professional persons like Medical
practitioners, practicing Lawyers, Chartered Accountants etc.also adopt some suitable
types of accounting methods. As a matter of fact, accounting methods are used by all
who
are
involved
in
a
series
of
financial
transactions.
The scope of accounting as it was in earlier days has undergone lots of changes in recent
times. As accounting is a dynamic subject, its scope and area of operation have been
always increasing keeping pace with the changes in socio-economic changes. As a result
of continuous research in this field the new areas of application of accounting principles
and policies are emerged. National accounting, human resources accounting and social
Accounting are examples of the new areas of application of accounting systems.
Nature of Accounting:
We know Accounting is the systematic recording of financial transactions and
presentation of the related information of the appropriate persons. The basic features of
accounting
are
as
follows:
1. Accounting is a process: A process refers to the method of performing any specific job
step by step according to the objectives, or target. Accounting is identified as a process
as it performs the specific task of collecting, processing and communicating financial

information. In doing so, it follows some definite steps like collection of data recording,
classification
summarization,
finalization
and
reporting.
2. Accounting is an art: Accounting is an art of recording, classifying, summarizing and
finalizing the financial data. The word art refers to the way of performing something. It
is a behavioral knowledge involving certain creativity and skill that may help us to attain
some specific objectives. Accounting is a systematic method consisting of definite
techniques and its proper application requires applied skill and expertise. So, by nature
accounting
is
an
art.
3. Accounting is means and not an end: Accounting finds out the financial results and
position of an entity and the same time, it communicates this information to its users.
The users then take their own decisions on the basis of such information. So, it can be
said that mere keeping of accounts can be the primary objective of any person or entity.
On the other hand, the main objective may be identified as taking decisions on the basis
of financial information supplied by accounting. Thus, accounting itself is not an
objective, it helps attaining a specific objective. So it is said the accounting is a means
to
an
end
and
it
is
not
an
end
in
itself.
4. Accounting deals with financial information and transactions; Accounting records the
financial transactions and date after classifying the same and finalizes their result for a
definite period for conveying them to their users. So, from starting to the end, at every
stage, accounting deals with financial information. Only financial information is its
subject matter. It does not deal with non-monetary information of non-financial aspect.
5. Accounting is an information system: Accounting is recognized and characterized as a
storehouse of information. As a service function, it collects processes and communicates
financial information of any entity. This discipline of knowledge has been evolved out to
meet the need of financial information required by different interested groups.