What Is The Meaning Of Public Sector Accounting? What is public sector accounting? You may be looking for the answer to the above questions, but have no worried because:
This lesson will consider The Meaning Of Public Sector Accounting and what is public sector accounting.
But for a proper view of the understanding of public sector accounting, we first have to know the meaning of the public sector.
MEANING OF PUBLIC SECTOR
The public sector consists of the government and all publicly controlled or publicly funded entities that deliver public programs, goods or services. It is made up of entities established by law for the purpose of meeting the public interest without a profit-making motive.
The public sector comprises diverse organizations with different nature, each having objectives that focus on a different aspect of government overall objectives.
It covers the central government (that is governing body with a defined territorial authority including all departments, ministries, agencies and other wings of the government that are integral parts of the structure, and are accountable to and report directly to the central authority such as the legislature, cabinet or executives head), regional government (which may include state or provincial government), local government and related government entities (such as boards, authorities, commissions and enterprises), nationalized and public corporations.
WHAT IS THE MEANING OF PUBLIC SECTOR ACCOUNTING
Public sector accounting is concerned with recording financial transactions of the government, analyzing the transactions, classifying, summarizing, reporting and interpreting the financial information’s of the government to the various stakeholders.
It involves receiving, ensuring custody and disbursing public and trust monies to the various units of the government and rending accountability to the providers of these monies as required by the law.
Hence, public sector accounting serves as a means of ensuring accountability for the stewardship of government resources and the provision of financial information for control.
The public sector accounting system applies a set of procedures and methods necessary for the management of government resources.
CHARACTERISTICS OF PUBLIC SECTOR ORGANISATIONS
The public sector organization has unique features that distinguish them from other entities.
The following are the basic features of public sector organizations:
- They are established to meet public interest rather than making a profit.
Thus any surplus on the operation by way of excess income over expenditure is used to improve the quality of services they provide to the public.
- They enjoy a legal monopoly.
Which is derived from the laws that established them, giving them an exclusive right over a certain activity they perform? So, they are allowed to be the sole provider of certain basic services which when left in the hand of the private sector will be provided at a higher price to the public.
Due to their source of funding, the financial reporting of the government organizations is usually based on vote or fund accounting system rather than equity accounting which is used by public businesses that are financially autonomous.
- A high level of stewardship and accountability is required
To hold managers and public officers accountable for resources entrusted to them as their resources are from the public fund.
- They provide services that meet the basic need of the public
These may include the provision of water, electricity, health, security, etc. these services are provided at subsidized prices to be within the means of the middle and low-income groups.
- Performance measurement is based on the achievement of the objective and another non-financial measure rather than profit.
This may include input and output ratios, efforts and accomplishments, cost and benefits, etc.
- They apply different accounting framework to meet the specific objectives of the organization.
OBJECTIVES OF PUBLIC SECTOR ORGANISATIONS
The objectives of public sector organizations are to a large extent influenced by the laws that established them, the political objectives and the aspiration of the central government.
Generally, the public sector exists to meet the following objectives.
- To fulfil legal requirement s as may be contained in the laws established them
- To fulfil the stewardship and accountability function. This is normally achieved through the requirement of preparation of account showing how public funds have been utilized.
- To provide basic services to all citizenry within different income bracket at affordable prices
- To provide services outside the domain of the private sector. The private sector may not enter into the provision of these services due to huge capital investment requirement or low returns and therefore unattractive, though necessary.
- To help in the effective regulation and control of the key areas in the economy such as the area of health, education, social and economic.