Public sector accounting is simply government accounting.
So you have come to the right place for the most complete and accurate information about public sector accounting. And it doesn’t matter whether you’re interested in something as simple as the reason accounting is needed by the government, or want to get granular with details about the processes involved, its users, or relationship with private accounting.
Ready to dive in?
What is Public Sector Accounting?
Public sector accounting is the process of recording, analyzing, classifying, summarizing, communicating, and interpreting the financial information of the government in detail. Public sector accounting is used to determine government revenue and expenses. It can also be used for forecasting, planning, and budgeting. The main aim of public sector accounting is to know how public sector organizations are doing financially.
What are the Processes of Government Accounting?
As earlier stated, public sector accounting involves the process of recording, analyzing, classifying, summarizing, communicating, and interpreting. These processes are further discussed as follows:
Recording involves the process of documenting the financial activities and transactions of the public sector entities in books of accounts like cash book, vote book, or ledger.
Analyzing involves the process of separating transactions and putting each of them under the appropriate heads and subheads.
Classifying involves grouping transactions into revenue and expense descriptions and bringing them under the appropriate head and subheads, with their code numbers of accounts.
Summarizing has to do with bringing together all the classes of accounts and preparing them into reports periodically.
Communicating involves providing financial reports on all the government financial activities to interested parties without the use of ambiguity or irrelevant words.
This is the final stage and it involves explaining what has been reported in the financial statements and reports with respect to the overall operations and performance of government organizations. This is to enable interested parties and users to make decisions based on their evaluation of the reports.
What are the Objectives of Public Sector Accounting?
Below are the purposes of government accounting:
- Ensuring compliance with the laws: One of the aims of public sector accounting is to determine whether public organizations’ transactions and disbursement amongst other things comply with the provisions of the law.
- Providing evidence of stewardship: It is common knowledge that the resources and funds of a nation are entrusted to the government. As the steward of these resources and funds, the government is required to give an account of how the nation’s funds and resources are used. And this is where the public sector accounting comes in, to ensure a transparent and accurate account is given.
- Assisting in planning and control: The purpose of government accounting is to enable the government to plan well for the future activities and programs of the Nation.
- Assisting in objective and timely reporting: Another purpose of government accounting is so that users of the information on the government accounting can get to know what the government of their country is doing and accurately evaluate the performance of the government.
Other importance of public accounting include:
- Acting as the basis for decision-making
- Reconciling costs and benefits
- Highlighting the various sources of revenue receivable and the expenditure to be incurred.
- Identifying the sources of funding capital projects.
- Comparing actual performance with the set target, etc.
Who are the Users of Public Sector Accounting Financial Information?
- Internal users – This category features:
- The president, state governors, and local government councils chairmen).
- The federal ministers and state commissioners.
- Permanent secretaries/directors of government departments and
- Chief executives of government business entities/agencies.
- The organized labor unions, etc.
- External Users – This second group of the users of the public sector accounting information is comprised of:
- The National Assembly, members of the public, and other government agencies.
- Foreign countries and foreign financial institutions such as the International Monetary Fund (IMF), World Bank, United Nations Children’s Fund (UNICEF), etc.
- Creditors and researchers, etc.
What’s the difference between public and private sector accounting?
The main difference between public and private accounting is found in who uses their end products and how they operate.
The public accounting setup features work with multiple clients and varying verticals; plus, the financial statements/reports are meant for the public.
In private accounting, the accountant is an employee of the business whose accounts are being audited or analyzed. The financial statement and report are meant for the manager or other users within the organization or business.
Is public accounting harder than private accounting?
Unlike private accounting, private accounting usually involves long hours, tight deadlines, and travels. These realities make public accounting a high-stress environment.
Is it worth staying in public accounting?
Despite being physically and mentally demanding, I’d think public accounting is worth it. It offers many opportunities for growth and pay. Not to mention, the longer you stay, the higher your leverage.
How do you survive in public accounting?
In public accounting, you won’t only be faced with mental and physical exhaustion. The following tips can help in typical situations.
- Take time out
- Exercise and/or volunteer
- Stay connected to friends within and outside the firm
- Keep a sense of humor
- Be a team player