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Differences Between Government Accounting And Commercial Accounting

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Following are the main differences between government accounting and commercial accounting:

1. Meaning
The accounting system maintained by the government offices is known as government accounting. The accounting system maintained by business organizations is known as commercial accounting.

2. Objective
Government accounting is maintained by the government offices to know the position of public fund. Commercial accounting is maintained by business organizations to know the profit or loss and the financial position of the business.

3. Budget
Government accounting strictly follows the government budgeting system. commercial accounting does not follow the government budgeting system.

4. Basis
Government accounting is prepared on cash basis. Commercial accounting is prepared on cash as well as accrual basis.

5. Level Of Accounting
Government accounting has the system of central level and operating level accounting. Commercial accounting has no provision of central level and operating level accounting.

6. Rules And Provisions
Government accounting is strictly maintained by following the financial rules and provisions of government. Commercial accounting is maintained by following the rules and principles of 'Generally Accepted Accounting Principles'.

7. Information
Government accounting provides information to the government about the receipts, transfer and deposition of public funds. Commercial accounting provides information to the concerned parties about the operating result and financial position of the business.

8. Auditing
An Auditor General Office audits the book of accounts kept under government accounting. A professional auditor can audit the books of accounts kept under commercial accounting.

Related Topics
Meaning Of Government Accounting
Features Of Government Accounting
Objectives Of Government Accounting

Objectives Of Government Accounting

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The following are the main objectives of government accounting:

* To record financial transactions of revenues and expenditures related to the government organizations.

* To avoid the excess expenditures beyond the limit of the budget approved by the government.

* To make expenditures according to the appropriate act, rules and legal provisions of the government.

* To provide reliable financial data and information about the operation of public fund.

* To prevent misappropriation of government properties by maintaining the systematic records of cash and store items.

* To facilitate for making auditing of the books of accounts.

* To help for preparing different financial statements and reports.

* To facilitate for estimating the annual budget by providing historical financial data of government revenues and expenditures.

Related Topics
Meaning Of Government Accounting
Features Of Government Accounting
Difference Between Government Accounting And Commercial Accounting

Features Of Government Accounting

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The following are the main features of government accounting.

1. Profit And Loss
Since government is a public institution, its main objective is to maintain law and order in the country. Therefore, the accounting system used by an institution is not supposed to reveal its profit and loss, but to reveal how public funds and properties have been used for that purpose.

2. Government Regulations
Government accounting is maintained according to government rules and regulations. The financial policies, rules and regulations determine the system of government accounting.

3. Double Entry System
Government accounting is based on the principles and assumptions of double entry system of book keeping. Accordingly, every government financial transactions are recorded showing their double effects. One aspect of the transaction is debited and the other aspect is credited for each government financial transaction.

4. Budget Heads
All the expenses of government offices are classified into different budget heads and expenditures are made only on approved budget heads.

5. Budgetary Control
Government accounting facilitates budgetary control. No government office can make expenditure more than the allocated budget amount.

6. Banking Transaction
All government transactions are supposed to be performed through banks.

7. Auditing
The concerned department of the government must audit the books of accounts maintained by government office so as to avoid misuse and misappropriation of public funds.

Related Topics
Meaning Of Government Accounting
Objectives Of Government Accounting
Difference Between Government Accounting And Commercial Accounting

Meaning Of Government Accounting

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Government Accounting

Accounting is concerned with the processing of financial transactions of an entity. It generates and communicates necessary financial information to its users. It is, therefore, a process of recording, classifying and summarizing the financial transactions and communicating the results of its operations.

There are different branches of accounting. One of its branches is government accounting. Government accounting is that branch of accounting, which is used in government institution. The government accounting is different from other branches of accounting such as commercial accounting.

The accounting system used in government offices to record and report their financial transactions is known as government accounting. Government accounting is concerned with systematic and scientific recording of government revenues and expenditures. It is the systematic process of collecting, recording, classifying, summarizing and interpreting the financial transactions relating to the revenues and expenditures of government offices. It reveals how public funds have been generated and utilized for the welfare of the general public. Therefore, government accounting may be defined as an accounting system used in government institution for the purpose of recording, classifying, summarizing and communicating the financial information regarding the collection and utilization of public funds and properties. It is concerned with keeping records of government revenues and their expenditure in different development and administrative works. It reflects the receipt and payment position of the public funds.

Related Topics
Features Of Government Accounting
Objectives Of Government Accounting
Difference Between Government Accounting And Commercial Accounting

Differences Between Balance Sheet And Statement Of Affairs

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Following are the main differences between balance sheet and statement of affairs:

1.Basis
Balance sheet is prepared on the basis of double entry system of book keeping. Statement of affairs is prepared on the basis of incomplete records.

2. Purpose
Balance sheet is prepared to present financial position of the business. Statement of affairs is prepared to find out either the amount of opening capital or closing capital.

3. Financial Position
Balance sheet shows the true financial position of the business. Statement of affairs does not show the true financial position of the business.

4. Stage Of Preparation
Balance sheet is prepared at the final stage of accounting procedure. Statement of affairs is not prepared at the final stage of the accounting procedure.It is prepared before the preparation of statement of profit or loss.

Related Topics
Concept Of Statement Of Affairs And Its Preparation
Concept And Meaning Of Balance Sheet

Concept Of Statement Of Affairs And Its Preparation

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Statement of affairs is a statement of capital, liabilities and assets. Statement of affairs is prepared under the single entry system in order to find out the amount of opening or closing capital of the business. For the purpose of determining the amount of opening capital, the statement of affairs is prepared on the opening date. The statement of affairs is prepared on the closing date for the purpose of determining the amount of closing capital. It is also known as the balance sheet of single entry system.

Preparation Of Statement Of Affairs
Statement of affairs is prepared like the balance sheet. All the liabilities are shown on left-hand side and all the assets are shown on right-hand side. The difference between the total assets and total liabilities is considered as the amount of capital.
Capital = Total Assets - Total Liabilities

Related Topic
Difference Between Balance Sheet And Statement Of Affairs
Concept And Meaning Of Balance Sheet

Calculation Of Profit Or Loss Under Single Entry System

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The following method is used for the calculation of profit or loss under single entry system.

Net Worth Method
Net worth method is also called statement of affairs method or capital comparison method. According to this method profit or loss of the business is determined by making comparison between the capital of two dates of a period. For example,
Capital as on 1st January 2009 = $ 150000
Capital as on 31st December 2009 = $ 200000
Profit for the year 2009 = Closing capital -Opening capital = $200000-$150000 = $50000.

If there are other capital related items such as drawing, additional capital, interest on capital etc. are to be adjusted to ascertain the amount of profit or loss.
These items include:

* Drawing: If the drawing is made during the year, it should be added to the amount of closing capital.
* Additional capital: If additional capital is introduced in the business during the year, it should be deducted from the amount of closing capital.
* Interest on capital: If the interest is provided on capital, it should be deducted from the amount of closing capital.

Related Topics
Meaning And Features Of Single Entry System
Advantages Of Single Entry System
Disadvantages Of Single Entry System
Difference Between Single Entry And Double Entry System