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What is GOVERNMENTAL ACCOUNTING? What does GOVERNMENTAL ACCOUNTING mean? GOVERNMENTAL ACCOUNTING meaning - GOVERNMENTAL ACCOUNTING definition - GOVERNMENTAL ACCOUNTING explanation.
Source: Wikipedia.org article, adapted under https://creativecommons.org/licenses/by-sa/3.0/ license.
Various governmental accounting systems are used by various public sector entities. In the United States, 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 (FASAB) sets forth the accounting standards to follow. Similarly, there is the Governmental Accounting Standards Board (GASB) for state and local level government.
There is an important difference between private sector accounting and governmental accounting. The main reasons for this difference is the environment of the accounting system. In the government environment, public sector entities have different goals, as opposed to the private sector entities' one main goal of gaining profit. Also, in government accounting, the entity has the responsibility of fiscal accountability which is demonstration of compliance in the use of resources in a budgetary context. In the private sector, the budget is a tool in financial planning and it isn't mandatory to comply with it.
Government accounting refers to the field of accounting that specifically finds application in the public sector or government. A special field of accounting exists because: - The objectives to which accounting reports to differ significantly from that for which generally accepted accounting practice has been developed for in the private (business) sector; & - The usage of the results of accounting processes of government differs significantly from the use thereof in the private sector.
An exception exists on the above-mentioned differences in the case of public utility businesses (for example Electricity Services) that may be intended to produce a net income or profit, but a significant debate exists over whether there should be such an exception. Nationalisation includes, amongst others, the argument that entities should be either private or public, and that the objectives of public entities should differ significantly from that of private entities. In other words, is the generation and reticulation of electricity with the objective to generate a profit in the public interest or not? And if it is the best way, shouldn’t it then be completely private instead of having access to public funds and monopolies?
Governmental accounting standards are currently being dominated by the accounting standards (internationally sometimes referred to as IFRS) originally designed for the private sector. The so-called Generally Recognised Accounting Practices (GRAP) that are being enforced in the public sector of countries such as South Africa, one of the front-runners in this regard is based on the Generally Accepted Accounting Practices originally developed for the private sector. The above and common sense raises the question of whether this is the best solution. It is of course cheaper and it is alleged that the history of separate development of accounting practices for government has not been successful. Even at the onset of the current fiscal crisis in Europe and other parts of the world it was argued authoritatively that the sometimes inapplicable accounting practices of the private sector being used, have contributed to the origination of, and belated reaction to, the fiscal crisis.(1)
Sources (not directly quoted but used in synthesis):
1. Sanderson, I. Worldwide Credit Crisis and Stimulus Packages in Accountancy SA, June 2009, p. 14.
2. 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, 1994.
3. 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.) 4. Donald amcool