Have you ever imagined the impact and importance of financial services beyond traditional accounting? Of course, people hardly pay attention to this part, but accounting and finance aren’t limited to traditional services and that’s the reality of the present time. It has several implementations and uses for individuals, companies, and different industries.
No matter if it comes to corporate and government sectors, accounting operates as the cornerstone for all public and private entities. Let’s explore the government accounting concept which is one of the top branches of accounting!
What is Governmental Accounting?
Governmental accounting is a reputed branch of accounting that deals with the management of public revenue. In this specialized accounting service, experts do efficient recording of financial transactions obtained by the government and various public sectors that include federal, city, and state levels.
Consequently, accountants take care of government finance affairs by handling tax-related matters and preparing final reports to present a clear picture of their assets, liabilities, and income statements. The basic purpose of preparing an income statement and final report is to drive the net income of public offices after separating expenses from the income.
In short, it’s an effort done by certified professionals who maintain and record public earnings along with the budget spent on business. Of course, the government must utilize the budget for the right projects and keep things transparent with the public. The public sector employees are accountable for showing their financial statements.
Key Features
- Deals in government finance affairs and come up with accurate information about their revenue details.
- Gathers financial data of government stakeholders to deliver final reports based on income statements and other necessary details.
- Determines whether the funds have been fairly utilized by the government.
Goals of Governmental Accounting
Goal setting is a vital aspect that specialists have to consider while handling government finance matters. No doubt, public sectors need to plan their finances for efficient budget planning and utilization. In addition to this step, there is a huge difference between private and public entities for generating revenue, even their taxation queries differ from each other. However, the major goal is to become a tax filer irrespective of these differences.
Every citizen whether employed at a private or government organization has to submit a tax return showing the assets and liabilities through a financial statement that accountants prepare for all entities. As far as government accounting is concerned, there is no way to escape from this responsibility that accountants have to fulfill. Let’s discuss some top goals of government accounting!
Maximizing Profits
The main objective of public entities is to increase profits, whereas government accounting helps entities to raise profits and make sure they distribute them equally. No doubt, the citizens have to pay taxes to the state to keep the system running and that’s why the government accounting process takes place. Besides raising profits, the target of the business is to empty the accounts before the accounting period ends.
Recording Expenses
In the accounting process, the top objective of an accountant is to record the expenses to create the balance sheet. Of course, profits can be increased when companies reduce expenses, so for public organizations, the strategy remains the same. Looking at this consideration, the experts suggest entities undergo specific activities to control expenses.
Financial Statements and Reports
Budget planning and expenses are two vital aspects that fall under government activities. Further, if we look at controlling expenditures, the specialists find the facts after creating financial statements and go for reporting. Public reports help government entities to overview the entire year’s performance. This is why, it is the major objective of the public accounting process.
Protecting Government Property
While looking at the accounting goals for public enterprises, the utmost purpose of a professional is to provide security to government property by offering legal advice. Therefore, the preparation of financial statements comes along with analysis that ultimately guides organizations to take protective steps.
Government Accounting Principles
With the objectives of government financing methods, qualified accountants also have to deal with the principles of accounting under the governmental standards of accounting. Every specialist has to work according to the laws and regulations laid out by the Federal Accounting Standards Advisory Board. Using this particular accounting principle, agencies find an opportunity to organize things efficiently and it reduces the chances of mistakes.
Without following the accounting principles, it would be impossible to run the public financial management system. These are the basic standards that guide organizations to raise awareness and increase profits as well.
In the United States, The Governmental Accounting Standards Board (GASB) plays a key role in providing updates to the professionals who take the responsibility of amending government accounts. However, these principles vary from state to state, but more likely the pattern remains the same for organizations that bring positive outcomes. Let’s discuss some points that play a crucial role in accounting principles!
Accounting and Reporting
There is no chance to ignore the accounting and reporting capabilities of public entities. Financial reporting is a must for government sectors.
Accounting System
With the support of accounting and reporting skills, the experts should develop a reliable accounting system that records single and double entries for the organizations. Both single-entry and double-entry system reduces the hassle of work and saves time.
Details of Incomes and Expenditures
If you have developed a smooth accounting system for recording entries, make sure you also have the skills to classify the differences between income heads and funds along with expenditures.
Government Assets Valuation with Reporting
Asset valuation is an essential consideration that experts have to focus on for public entities. They make final reports and add the details of assets after evaluating them through financial statements. The purpose of this step is to reduce the liability and separate the expenses.
Annual Financial Reports
The experts also don’t have a chance to skip the annual financial reports once the accounts have been recorded and entries made. The government funds need to be reviewed by the professionals. Thus, they also check whether the budget serves the right purpose.
How Public Entities Allocate Funds?
For public organizations, fund allocation is an important step that needs to be done effectively. The following are the funds that public sectors allocate:
General Fund
It is the primary fund used for organizing routine operations of the government. This is why, the fund has been named general.
Special Revenue Fund
Special revenue fund is allocated for special purposes such as for emergencies like COVID-19. Hence, the purpose is unique for utilizing this special fund.
Debt Service Fund
A debt service fund is also used for paying debt payments that public entities owe. Additionally, this is further categorized into specific fund types.
Capital Project Fund
Capital project funds are ideal for renovating purposes that include projects like renovating a building, city library, bridge, and historic buildings.
Permanent Funds
Permanent funds are not regular types of funds, as these fall in the category of endowment funds and are specifically used for schools and hospitals.
Did You Know?
“Government accounting does not focus on corporate earnings. It just increases the transparency of volatility in earnings once the financial statements are made.”
Meet The Pro Accountants to Manage Your Public Accounts
If you are a government servant looking to set up your public finances and don’t know how to make it happen. Get in touch with The Pro Accountants to manage your financial records and statements. We are a team of intellectuals that not only organizes your balance sheet but also prepares a final report that helps firms improve decisions that lead to growth. Contact us our experts to get our public reports ready today!
