Government accounting is the system used by governments to keep track of financial resources and expenditures. It is used by the government to check whether it is operating within its budget and if public funds have been wasted. The government must keep a record of its banking transactions, which is done through a separate bank account. All government expenses are recorded under different budget heads, which help in controlling expenditures. It also helps in the audit process. The following are some of the benefits of government accounting.
Full accrual information reports the full cost of providing services to citizens and other users of government assets. It is similar to the way profit-seeking corporations account for their assets and expenditures. The government’s equity is represented as stockholders’ equity or net assets. Two government-wide reports present the results of full accrual accounting. These reports are the Statement of Net Assets and the Statement of Activities. For government entities, these accounts are used to keep track of their finances and identify areas for improvement.
Government accounting is a scientific procedure used by the government to keep track of resources. Governments use this information to allocate resources to different programs. The financial data is also used by almost every government entity to understand how much money is spent on what. This allows government officials to better manage resources and implement changes when necessary. The goal of government accounting is to increase transparency in government and provide the public with useful information. And this transparency is what makes government accounting so important!
As the name suggests, the GASB is an independent board of seven members with extensive knowledge of governmental accounting. Each member is appointed by the FAF Board of Trustees for a five-year term. The board also convenes various expert consultative groups and task forces to advise on issues pertaining to governmental accounting. This group is responsible for establishing and maintaining the standards for governmental accounting. The Board meets annually and assembles task forces and expert consultative groups to make recommendations to improve the standards.
The financial statements of government entities are organized based on the types of funds a government manages. They may be either income-determining or expenditure-determining. Income-determining funds report on activities that are paid for by government revenue. Municipal utilities are examples of income-determining funds. Fiduciary funds report on assets held in a trustee capacity. Governments may report long-term assets as expenses. On the other hand, they may use the optional modified method for reporting assets. In governmental financial reporting, this method allows the government to make a long-term commitment to the development of a particular infrastructure project.
Unlike private sector entities, government agencies have a unique position as the public. In addition to its stakeholders, the public has very different requirements and expectations. A government’s accounting system must provide relevant financial information to relevant role-players in decision-making. These role-players usually consist of representatives and officials who have objectives that are unrelated to its net income results. They have more important goals, such as service delivery and efficiency. However, the taxpayer wishes to pay as little tax as possible, and a reliable government accounting solution is vital to meet their goals.