INTRODUCTION

Government has to do with a whole Nation. It is represented by organisations that are

established to use the resources of a Nation for the upliftment and the welfare of its citizens.

For the skilful administration development of a Nation, there is the need to institute financial and
accounting systems in the established organisations which are responsible for finances and
human resources. In the same way, such systems are to be introduced and nurtured in those
organisations that will be using the finances for such National development. The systems
introduced should promote transparency, data storage and retrieval, and accountability.
Government organisations are different from private sector establishments. Consequently they
have different features, objectives and functions, which explain their methods of information and
dissemination and stewardship accounting.

GOVERNMENT

Government refers to the collection of public institutions established and given the authority to
run the affairs of a country. It is a system of governance and includes the body of individuals
who are authorised to administer the laws of a Nation.

GOVERNMENT ACCOUNTING SYSTEM AND PROCESSES

Government Accounting refers to all the financial documents and records of public institutions
that relate to the collection of tax payers‟ money, and the analysis, control of expenditure,
administration of trust funds, management of government stores and all the financial
responsibilities and duties of the relevant organs. Government Accounting system is the way of
accountability through which the established institutions of the public render stewardship on the
revenue of the Nation and how it has been disbursed.

Government accounting includes the process of recording, analysing, classifying, summarising,

communicating and interpreting financial information about Government in aggregate and in
details, recording all transactions involving the receipt, transfer and disposition of public funds
and property. The processes of Government Accounting are further discussed as follows:

(a) Recording
 Recording involves the process of documenting the financial transactions and activities in
the necessary books of accounts are cash book, ledger and vote book.
(b) Analysing
Analysing involves the process of separating transactions according to their distinct
nature and posting them under appropriate heads and sub-heads.

(c) Classifying

Classifying has to do with the grouping of the transactions into revenue and expense
descriptions and bringing them under major classes as „Revenue Head‟ and „Sub-heads‟,
with their relevant code numbers of accounts.

(d) Summarizing

Summarising concerns the bringing together of all the classes of accounts and preparing
them into reports periodically as are statutorily or organisationally required.

(e) Communicating

Communicating is about making available financial reports on all the government

financial activities from the necessary accounting summaries to various interested parties.
The style of communication adopted should be un-ambiguous, lucid and devoid of
jargons as much as possible.

(f) Interpreting

Interpreting ends the process by giving explanations on what has been reported in the
various financial statements and reports, as regards the overall operations and
performance of the relevant government organization (s). This is to enable the necessary
parties and users to take relevant decisions based on their assessments of the reports.
 NATURE AND OBJECTIVES OF GOVERNMENT ACCOUNTING

The objectives of Government accounting include the following:

(a) To fulfil legal requirement. The law requires that government accounts are prepared
and audited annually.
(b) To perform the stewardship function. The ruling government is the steward of the
resources and finances of the Nation. Government has to give account of how these
finances are used.
(c) To enable Government to plan well the future activities and programmes of the
Nation.
(d) To provide a process of controlling the use of the financial and other resources .
(e) To provide the means by which actual performance may be compared with the target
set.
(f) To evaluate the economy, efficiency and effectiveness with which governance is
carried out.

PURPOSE OF PUBLIC SECTOR ACCOUNTING

The purposes of Public Sector Accounting include:

1. Demonstrating the proprietary of transactions and their conformity with the law,
established rules and regulations.
2. Measuring current performance.
3. Providing useful information for the efficient control and effective management of
government operations.
4. Facilitating audit exercise to be carried out.
5. Planning future operations.
6. Appraising those in the authority, in efficiency and effectiveness

USERS OF GOVERNMENT ACCOUNTING INFORMATION

There are two groups of users of Government Accounting information. These are „internal‟ and
External‟ users whose peculiarities and areas of interests are briefly discussed, as follows:
Internal Users and Interest Areas:

This group of users includes:

The Labour Union in the public service which will press for improved conditions of employment
and security of tenure for their members.

Members of the Executive Arm of Government such as the President, Ministers and Governors.
Their interest areas are to ensure probity and accountability through score keeping and
performance control which are achieved through accounting information.

Top Management members such as Permanent Secretaries of various Ministries and General
Managers of Parastatals. They are the conduit of accounting information generation and
transmission and serve as liaison officers between Government, employees and the public.

External Users and Areas of Interest.

External Users include

Members of the Legislature at both National, State and Local Government levels. Information in
the accounts of Governments are the major media through which politicians render stewardship
to their constituencies and apprise them of the endeavours of governance.

The Members of the Public, to demonstrate accountability and assist the people to appreciate or
otherwise the efforts of Governments.

Researchers and Financial Journalists. Researchers are expected to develop new and better
ideas of governance. Financial journalists cherish accounting information to advise existing and
potential investors.

Financial Institutions, such as the Commercial Banks, World Band and International Monetary
Fund (IMF). Accounting information assists them to evaluate the credit rating of a borrowing
Nation.

Governments, apart from the ones reporting. Governments collaborate on ideas of investment
and research. They require accounting information on the well-being or otherwise of each other.
Suppliers and Contractors. Suppliers and contractors are eager to ascertain the ability of a
Government to pay for goods and services delivered. Only Accounting information can be
revealing.

COMPARISONS BETWEEN PUBLIC AND PRIVATE SECTORS

The term “Public Sector” refers to all organisations which are created, administered and financed
by Government, from the tax payers‟ money, on behalf of the members of the public. Such
establishments which are referred to as the “three tiers” Government Companies, Parastatals and
other public agencies created by the Nation‟s Constitution, Acts of Parliament and Bye-Laws.

The organisations produce public goods and services which are available to the citizens free or
at very minimum charges. Public sector organisations are managed by appointed members of the
citizenry.

“Private Sector” is that part of the economy where the factors of production of land, labour,
capital and entrepreneurship are supplied by private individuals who are the business owners.
They manage the businesses, beat the risks and earn the

profits through the sale and production of goods and services as sole traders, business partners or
shareholders in limited liability companies.

Public Sector organisations are content with pricing products or services at marginal costs,
thereby catering for the welfare of the public, privately owned businesses venture to recover not
only marginal costs but fixed overheads and even earn profits. Public concerns do not
distinguish between capital and revenue expenditure, unlike private companies. The latter write
off the values of fixed overheads and even earn profits. Public concerns do not distinguish
between capital and revenue expenditure, unlike private companies. The latter write off the
values of fixed assets over estimated useful lives through depreciation.

Public Sector organisations are accountable to the citizens of the Nation through their elected
representatives. Private Sector concerns are answerable to their owners.
DIFFERENCES BETWEEN GOVENMENT ACCOUNTING AND PRIVATE SECTOR
ACCOUNTING

These may be discussed as follows:

 In Government Accounting, tangible and fixed assets as buildings and motor vehicles, are not
shown in the Statement of Assets and liabilities. They are written off immediately in the year of
purchase. Private Sector Accounting reflects fixed assets in the balance sheet, displaying the
historical cost, accumulated depreciation and written down value of each.

 Government Accounting does not record stocks, debtors in the balance sheet (Statement of
Assets and liabilities), unlike Private Sector Accounting which displays those items, and others
such as “sales‟‟, “cost of goods sold‟‟ and “carriage outward expenses‟‟ (in the trading and
profit and loss accounts).

 Private Sector Accounting is peculiar to commercial undertakings which have the

maximisation of profit as their main objective. Government Accounting focuses on the provision
of adequate welfare to the people with probity, accountability, legal and wise spending in mind.

 Government Accounting adopts „cash basis‟ of accounting, as against „accrual basis‟ of

Private Sector Accounting.

 Government Accounting mostly uses the budgetary approach, recording and classifying items
of revenue and expenditure under various „heads‟ and „sub-heads.‟ Although Private Sector
Accounting equally does budgeting and budgetary control, revenue and expenditure matters are,
recorded by their natural description, such as „stationary‟ and „discount allowed.‟

 Government Accounting operates predominantly „fund accounting‟ method in collating its

data and information. Private Sector Accounting uses the proprietary (or ownership) style which
discloses the nature and sources of the enterprise‟s finance or capital structure, such as „ordinary
share capital‟ or capital structure, such as „ordinary share capital‟ and „preference share
capital.‟
 The legal basis of Government Accounting is the Nation‟s Constitution and Act of Parliament,
unlike Private Sector Accounting which draws its existence and strength from Companies Acts.