Governmental accounting Research Paper

ABSTRACT Accounting is a procedure that had been adapted by business organizations to monitor the progress of an organization. The books of accounts are mirrors that any external party can use to tell whether the management decisions of an organization are working positively or not. State governments are currently using the similar phenomenon to control public expenditures. The state government officials who are in charge of finances are required to make accounts statements to account to the public how the finances have been utilized.

This has made the government leadership more responsible by investing in projects that generate more income to the government. GOVERNMENTAL ACCOUNTING Government accounting is a system used by the public sector to balance expenditures and incomes of the government. It is used to ensure that government money is used effectively. The government receives funds from citizens through taxes and income from public utilities. The money collected is used to pay civil servants employees and to meet other government expenditures.

The collected money is put in the treasury under the care of the finance minister. He is the one responsible to account for all expenditures of the government under the supervision of the head of state. Every year the serving minister of finance is required to read the government budget where he will clearly show how the government spent the money during the fiscal year. It is necessary for the government accounts to be balanced to if there is any misuse of public funds by the government officials and also to determine whether the collected amount is sufficient to cater for all public expenditures.

Whenever there is a deficit in the government budget, the government will have to invent other measures to cater for it (Gauthier 2005). These may be through external borrowings and imposing more tax to the citizens. When allocating funds for various projects, the executive committee is required to verify the amount of funds needed to meet the expenses and the primary source of those funds. The projects have to be approved by the legislature that will ensure that the project is worth the implementation.

The basic of government financial accounting was established in the United States by the governmental accounting standards board (GASB). The purpose of the report was to give information that will enhance the decision making process of various groups. These groups, according to GASB were governmental entity citizens, citizen representatives like legislatures and oversight bodies and for other investors and creditors involved in the lending process. Governmental accounting information is a report that is meant to show the accountability of the government.

Accountability of government spending is necessary as it involves the transfer of funds from the citizens to the government. It is important for the taxpayer to know what is done by his money. This accountability is fulfilled when the necessary information is posted to the citizens in a language that is understandable to them and the expenditures approved. There are two main budgets used by the government, an annual budget that shows the total revenues and expenditures for a certain fiscal year and a capital budget that control the expenditures used to construct government projects and to acquire assets.

Capital budgets are also referred to as operating budgets because they recorded in accounting books to control expenditures. Most laws insist on the government maintaining a budget that is balanced, this means that the total revenues should either be equal to or exceed the allocations (Gauthier 2005). In order to balance the accounts of the government, a fund accounting structure is used to control resources; this is done by allocating the various financial activities into different sets of liabilities, balancing assets and net assets.

There are three fund groups that have been identified by GASB, fiduciary, governmental and propriety. Fiduciary funds are the funds that the government holds on behalf of other beneficiaries, the government is not allowed to use such funds but keep them until when they are needed. An example of such fund is pension for employees. Propriety funds are those that account for the different business transacted by the government where a certain duty is required, an example is utility funds. Governmental funds are those used by the government in meeting the daily expenditures.