Government Accounting, Its Approaches and Future


All entities involved in the management and the oversight of governmental operations and all parties that work in the sphere of local or state finances need to have an understanding of governmental accounting, which is based on a specific set of principles and procedures. Thus, government accounting is defined as a process targeted at recording, analyzing, and interpreting financial data relevant to a specific government. Critical objectives of government accounting are making sure that all relevant financial operations are carried out in time and keeping track of financial records necessary for efficient budgetary control. In this paper, the goal is to review relevant research articles on the topic of government accounting in order to get a deeper understanding of the subject.

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All resources are chosen for the assignment review the concept of government accounting from different perspectives. The complex nature of government accounting as a process is given extensive attention in order to provide an explanation of how the procedure takes place. The relevant keywords used in the articles chosen for analysis include accounting, government accounting, accrual accounting, national governments, and budgeting. As the definition of government accounting has already been provided, it is important to define the following:

  • Accounting is a comprehensive and continuous recording of financial information relevant to a business for the purpose of analyzing and reporting them to tax collection and oversight agencies;
  • Accrual accounting refers to a method of accounting that focuses on the position and the performance of an entity on the basis of economic events and environment, disregarding the occurrence of cash transactions;
  • The national government is defined as a government that has members from multiple political parties and can often refer to the central government in unitary states;
  • Budgeting refers to the process of collecting and preparing financial statements in great detail in order to provide coverage for a relevant time period.

Literature Review

Issues in Government Accounting

Upon reviewing relevant literature on the topic of government accounting, it was revealed that the process itself is extremely complex and requires continuous improvement and modernization to ensure that it is done correctly and efficiently. According to the study by Caperchione, Christiaens, and Lapsley (2013), specific principles that relate to the complexity of government accounting include reform processes, ambiguity in accounting implementation, as well as accounting and power. When it comes to ambiguity, it is revealed that performance indicators are rarely used for making decisions related to governmental accounting, which often leads to inconsistencies (Caperchione et al., 2013). In terms of power relationships, government accounting also relies on the nature of political contexts within countries as well as interrelationships of partnerships and joint ventures within the public sector. The most important point that influences government accounting refers to reform procedures. Caperchione et al. (2013) pointed out that despite the continuous efforts of governments to pass unified accounting and budgeting reforms, there is still continuous struggle in terms of reaching a consensus.

Accrual accounting has been the main focus of researchers who investigated government accounting due to its higher reliability in measuring the financial performance of government activities (Salleh, Aziz, & Bakar, 2014). Thus, the key goal of accrual accounting within the governmental context is showing the financial condition of the country and adopting relevant measures for optimizing the utilization of available funds. Compared to fund accounting, accrual accounting offers several advantages that governments can use. For instance, it can show the financial position of an entity in the context of economic changes, provide an opportunity for demonstrating successful resource management, evaluate an ongoing ability of an entity to finance its activities, as well as evaluate performance on the basis of efficiency, costs, and accomplishments (Salleh et al., 2014). Overall, government accounting encompasses a broad range of activities that depend on the state of the financial environment in a country.

Differences in Approaches

The process of government accounting is complex and may range from one country to another due to the variability of financial policies that different countries establish. When comparing financial accounting procedures, it can be revealed that there are numerous issues associated with the nature of assets or that there are constant debates over policy development and implementation (Caperchione & Lapsley, 2011). In addition, different countries may approach the process of government accounting due to the challenges in reforms and accounting regulations, as mentioned by Caperchione and Lapsley (2011). Therefore, the comparative approach toward the analysis of accounting procedures in different countries usually reveals interesting insights about states’ financial policies and operations.

In order to provide examples of how different government accounting can be in various contexts, Jones, Lande, Lüder, and Portal’s (2013) research should be reviewed. Their study focuses on providing a comparison of government accounting reforms and budgeting efforts in the United Kingdom, the United States, France, and Germany. Jones et al. (2013) reveal that there is “no consensus” among the mentioned countries in terms of establishing the most appropriate package of reform possibilities (p. 421).

France is identified as a commitment- and cash-based accounting system that has changed throughout its development. For instance, the form of the annual budget has changed to a system of programs, missions, and actions that are being expressed at low levels in measurable outputs (Jones et al., 2013). Also, the country added continuous and annual accrual-based accounting to measure the effectiveness of the new budget systems. Germany has modified its accounting system in order to restructure the approach toward its budget to structure it according to departments. As a result, the country now manages two sets of accrual-based data: the data for liabilities and assets and the data for revenues and expenses (Jones et al., 2013). This shows that countries cannot establish the same systems for government accounting because all of them started developing their processes differently.

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After comparing the budgeting and accounting efforts in four countries, Jones et al. (2013) came to a conclusion that the United Kingdom was an exception because it had its “own budgeting basis and its own basis for accrual valuations, and it defined the reporting entity for the whole of government uniquely” (p. 438). In France, the UK, and Germany, each set of accrual accounting policies is based on business accounting; in the US, however, such policies do not explicitly rely on the same principles of accounting (Jones et al., 2013). This means that it is challenging to establish unified policies regarding government accounting since different countries approach this process in various ways. On the other hand, neither harmonization nor standardization of government accounting and budgeting efforts is necessary for resolving economic crises.

Future of Government Accounting

Government accounting has reached its best performance and development in highly populated areas, which means that the existing processes can vary from one part of a country to another (Chatters, 2002). This occurs due to the lack of coordination between local governments as well as inconsistencies in terms of office between county and city officials. Therefore, the future of government accounting depends on the financial and economic trends in a governmental organization as well as the employment of qualified practitioners.

Chatters (2002) identified that constructive accounting in the government field was needed for strengthening the financial system and making sure that audits of municipal and other accounts reach a satisfactory stage. In order to do so, appropriate measures and reforms are needed for laying a solid foundation for future accounting procedures. As mentioned by Gan (2016), when countries establish effective government accounting standards under the supervision of a certified governmental accounting board, future endeavors associated with the measurement of financial performance will be more consistent.

Analysis of Findings

Government accounting is shown to be a complex process that requires countries to understand the nature of their financial transactions for meeting the requirements of success. Accrual-based accounting is the preferred approach due to its focus on the financial position of an entity rather than on transactions that it makes. However, countries significantly vary in the way their governmental accounting efforts developed because of the differences in their financial progression. Jones’ et al. (2013) contribution to the comparison of countries’ approaches toward government accounting is especially important to note because the researchers managed to conclude that there was no need in enforcing the unification of accounting procedures because it would not solve the problems that came along with economic instabilities.

On the other hand, it should be mentioned that despite the efforts of introducing unified systems of government accounting, countries still have different procedures for ensuring the effectiveness of accountants’ operations. It is also important to note that in governmental contexts, budgeting and accounting can be either separate or joined elements of a country’s accounting framework, which makes it harder to establish one system in different governments (Jones et al., 2013). Overall, the future outlook for government accounting suggests that countries need to have a deeper understanding of the economic and political trends in order to establish effective accounting policies. It is expected that governments that cooperate on the financial basis will lean toward the trend of unification; however, the primary goal of any government accounting agency is making sure that their efforts align with the environment in which financial operations take place.

Concluding Remarks

Research on government accounting showed that countries around the world do not have the same approach toward the procedure. This does not mean that there should be one unified way of analyzing and communicating relevant financial data; rather, it indicates that various economic and political environments shape the way in which governmental accounting takes place. The outlook for governmental accounting implies the understanding of unique processes within the economic environment and implementing relevant measures to adapt to these processes. Codes of practices created by major financial institutions should take into account the developments and guidelines in matters of internal governance in order to ensure that governmental accounting efforts do not undermine the financial integrity of a country or any other jurisdiction.


Caperchione, E., & Lapsley, I. (2011). Making comparisons in government accounting. Financial Accountability and Management, 27(2), 103-106.

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Caperchione, E., Christiaens, J., & Lapsley, I. (2013). The primacy of, and complexity of, accounting for government. Financial Accountability and Management, 29(4), 349-353.

Chatters, C. (2002). Present and future of government accounting. The Accounting Review, 14(1), 48-51.

Gan, F. (2016). New achievements of government accounting reform in China – “Governmental accounting standards – basic standards.” Modern Economy, 7(4), 450-455.

Jones, R., Lande, E., Lüder, K., & Portal, M. (2013). A comparison of budgeting and accounting reforms in the national governments of France, Germany, the UK and the US. Financial Accountability and Management, 29(4), 419-441.

Salleh, K., Aziz, A. R., & Bakar, Y. N. A. (2014). Accrual accounting in government: Is fund accounting still relevant? Procedia – Social and Behavioral Sciences, 164, 172-179.

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