ABSTRACT
This write up is the result of a
studying of the accounting process in the public sector. The work is
principally aimed at providing an insight into the accounting system of Board
of Internal revenue Enugu
State, its inefficience,
problems and ways these problems could be effectively be managed. This work is
divided into five chapters namely; The first chapter which is the introduction
of the topic, the researcher defined public sector accounting, the purpose and
objective as well as the significance of the study. In chapter two, the
researcher focuses on the review of related literature as it is related to the
research topic and such review include historical development of government
accounting, Basis of accounting and sources of cash and recording media. In
chapter three, the researcher indicated the research method used in detail;
also it was in chapter four that the data used were collected, presented, analyzed
and show the responses to the area being investigated which were documented
along with their percentage relating to the question asked. In the last
chapter, the researcher discussed the result obtained from data analysis in
chapter four and also a useful and constructive suggestion was put down as that
any interested party may be wee guided.
TABLE OF CONTENTS
Cover
page:......................................................................
Title
page:…………………………………………………………..
Certification:………………………………………………………
Dedication:………………………………………………………..
Acknowledgement:………………………………………………
Abstract:………………………………………………………….
Table of
contents:………………………………………………
CHAPTER
ONE: INTRODUCTION
1.1
Background of the study:…………………………….
1.2
Statement of the Problem:……………………………
1.3
Objective of the study:………………………………..
1.4
Significance of the study:……………………………
1.5
Research question:……………………………………
1.6
Scope and Limitation of the
study:……………….
1.7
Definition of terms:…………………………………..
CHAPTER
TWO: REVIEW OF LITERATURE
2.1
Introduction:………………………………………….
2.2
Historical Development of Government
Accounting:
2.3
Financial Information:……………………………………
2.4
Sources of cash and Recording
Media:………….
2.5
Nature and purpose of Government
Accounting:..
2.6
Fund Accounting classification:…………………
2.7
Basis of Accounting:………………………………….
2.8
Depreciation:……………………………………………
CHAPTER
THREE: RESEARCH METHODOLOGY AND DESIGN
3.1
Research design ………………………………………..
3.2
Sources of data ………………………………………….
3.3
Population of the study ………………………………..
3.4
Determination of sample size and
techniques…….
3.5
Method of data collection ……………………………..
3.6
Procedure of data analysis ……………………………
CHAPTER
FOUR: DATA PRESENTATION AND ANALYSIS
4.1
Section A (Personal Data)……………………………..
4.2
Section B (Cash)…………………………………………
4.3
Section C (Cheque)……………………………………...
4.4
Section D (Stocks/Supplies) ………………………….
CHAPTER
FIVE: SUMMARY OF FINDINGS, CONCLUSION
AND RECOMMENDATIONS
5.1
Summary of findings …………………………………………..
5.2
Conclusion ……………………………………………………….
5.3
Recommendation ………………………………………………
References
Bibliography
Appendix
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
History has it that the
concept of accountability of public funds dates backs to the history of ancient
Greece. As old as theory is, it would
not be erroneous to say that the idea has been equally lost to antiquity
although not much is known about it, this makes the subject, government
accounting to remain a myth.
Accounting in the
public sector has received such a wide attention from scholars that the field
of public sector accounting scans to be neglected.
However,
there is general awareness all over the world of the need to pay greater
attention to the development of government accounting and financial
control. The reason is obvious,
government, in most, if not all nations constitute the largest single business
entity in many places, the core of the economy.
Government in any society is basically for maintaining law and order. With changes and the complete nature of the
society, government responsibility has automatically changed from the role of
maintaining law and order to business like nature in the modern era. The enormous activities of government,
equally call for enlarged government accounting in order to accommodate the immense
task. As a result of this development,
the traditional cash procedures of accounting can hardly meet the demands of
reasonable accounting for modern government in providing necessary services or
information. Therefore, there is need for government accounting to be dynamic
in order to accommodate both the fundamental roles and the developments.
Government accounting is the process of
recording, analyzing, classifying, summarizing, communicating and interpreting
financial information about government in aggregate and in detail, reflecting
all transactions involving the receipts, transfer and disposition of government
funds and property. The purpose are to
demonstrate the propriety of transactions and their conformity with established
rules to give evidence of accountability for the stewardship of government
resources and to provide useful information for the good control and efficient
management of government operation.
Financial management in the public
services as can be observed has failed to encourage and promote the efficient
utilization of public funds or serve as effective basis for planning and
decision making as well as to ensure proper accountability. Besides, it does not mean that financial
irregularities being detected in public sector at large is basically based on
traditional cash procedure of accounting but it does arouse a question whether
the modern system of accounting will make both modern management and financial
management viable.
1.2 STATEMENT OF THE PROBLEM
The
problem of this research is to identify these weaknesses and limitations
inherent in the cash accounting system of the public sector (in relation to the
accounting system of the sample ministry).
This is with a view to propose means of
eliminating them completely or at least reducing them to the barest
minimum. Put in question form, what are
those weaknesses and limitation that militates against adequate and efficient
accounting system and financial reporting in the public sector and how can they
be eliminated?
Some of these problem witnessed in the
public sector includes: the lack of accountability and abuse of delegated
authority by the officers in authority, fraud and misappropriation of government
funds, as well as lack of expertise and business acumen on the part of those
officers. Due to the fact that
government operation have been termed “Non-profit oriented operations”, there
is no pressure on the part of these government officers to perform up to
optimum expectation, accounts are kept in messy shape while the officers get
away with lack of proper accountability.
This research is carried out in order to
examine the extent to which proper accounts are being kept in the public sector
and to offer solution to the inherent problem discovered.
The
Enugu State Ministry of Finance and Economic Development is used as a sample
ministry for this research work.
1.3 OBJECTIVES OF THE STUDY
The
objectives of this research work/study include the following:
-
To determine the extent to which the
sample Ministry has installed an accounting system.
-
To determine the factors that
promote or constrain the accounting
system of the sample ministry.
-
To determine the impact of the
accounting procedures of the sample ministry upon its financial reporting.
-
To make recommendations based on my
findings.
1.4 IMPORTANCE OF THE STUDY
This research paper is intended to
examine the accounting system common in public sector with a view to exposing
and highlighting the inherent limitations in the system. Therefore, the research paper will be of
interest and useful to the general publics, the government as well as the
governed.
Government entrust public funds in the
hands of its officials hence government reporting has traditionally stressed
stewardship. Original accounting
emphasis has been directed towards measuring the public funds generated and
expended by the government’s programme or activities. The traditional reporting approach is filled
with many weaknesses of which it is hoped that this study will make useful
recommendation on how to improve upon the accountability and financial
reporting system of the government.
The duty to report all its financial activities
to the general public is a debt that government must pay. Such report will enable the people know how
public funds entrusted in the hands of the government have been utilized, this
type of report is very sensitive and useful to the public but very few of them
(the public) can understand it. This
study will serve as a useful medium to such member of the public who find
government financial reporting very ambiguous and hard to understand.
In many institution of higher learning
the accounting curriculum offered is tailored specifically to provide students
with an understanding of financial reporting as it relates to profit oriented
enterprises. For this purpose, students
are frequently surprised to discover that the basic framework of financial
accounting is significantly altered when the profit motive is removed. Though the accounting terminology may
initially appear to resemble foreign language to all students of accountancy,
and related professions who always depraved of knowledge of accounting system
of the public sector, this study will be very useful.
Moreover, potential researcher in this
aspect of accounting will find this research paper a very reliable reference
base.
1.5 RESEARCH QUESTIONS
Three
dominant questions being reviewed by this research include;
-
Is the accountancy/accounting system in
the public sector effective and adequate?
-
Does the accounting system in the public
sector provide for proper financial control and accountability of stewardship?
-
Does the accounting system in the public
sector provide useful information for the effective control and management of
government operations?
1.6 SCOPE AND LIMITATION OF THE STUDY
As the research topic would suggest at a
glance, the scope of this, is essentially focused on the accounting system of
the sample ministry as a general overview sample study of the accounting in the
public sector.
Therefore, this study will look into the
nature of the accounting system of the sample ministry; how the system
operates, the relevance of the system to the environment, problems and
prospects of the system.
LIMITATION
-
Scarcity of material:
This
aspect of accountancy (as pointed out above) has received very little attention
from scholars despite its long historical age.
Consequently, there are few literary publication on the student; the
researcher was therefore limited to reviewing few literature which are mostly
in origin, through relevant to the study.
- Bureaucracy:
Government establishment are well known
for maintaining utmost screening as regards their operations, more so, where it
is a study that concerns their financial operation the researcher found it
difficult to obtain material relating to the study (that is literature) and
some officials who have been very elusive and uncooperative. More so the bureaucracy and protocol the
research went through to obtain material and an appointment has been very
discouraging.
Due to all this constrains, the
researcher cannot say for certain whether the study has covered very rutty
gritty of the sample ministry as regards its accounting systems and procedures,
but one thing is certain, enough
materials have been gathered to help express an opinion as to the operative of
the sample ministry.
Apart from the above listed limitations
witnessed by this researcher is time constraint. This is a major limiting factor as the time
between approval of the study and the deadline for submission was very
short. The researcher relied heavily on
the good will of the research supervisor because he understands my plight. Again lack of sufficient funds to conduct an
extensive study was another handicap.
This was part of the reason why I had to
limit my work to fewer staffs than was earlier planned.
1.7 DEFINITION OF TERMS
Every field, discipline or profession
has its terminology. Therefore,
government accounting can never be an exception. In order to ensure easy understanding by the
users of this work in relation to government accounting which are extensively
applicable in public sector and or which have different meaning from private
sector interpretation and usage are here by define below:
(1) Accounting Entity: Clearly defined economic unit which (a) Engages
in identifiable economic activities
(b)
Controls economic resources (for which accounting records are maintained and periodic
financial statement is prepared.
(c) is distinct from the personal dealings of
its owners or employees. To ensure that
the fundamental accounting equation always refers to the same distinct entity
the boundaries of the unit, once established, must not be managed arbitrarily also
called reporting entity.
Accounting entity is in the accounting
and auditing, banking, commerce and finance and corporate, commercial and
general law subjects.
Accounting entity appears in the
definition of the following terms; accounting change, reporting entity,
combination, fund and accounting policies.
(2) Accrual Accounts: The principles of “accruals” makes a
distinction between the receipt of cash and the right to receive it, and the
payment of cash and the liability to pay it, stressing the importance of the
right to the assets or the legal obligation in favour of the movement of the
cash.
(3) Annual
Appropriations: These are issues
required to meet the expenditure of the state other than those covered by
direct issues from the consolidated Revenue Fund.
(4) Capital:
Is a plan of action quantified usually in monetary units to serve as a
guild for the achievement of government objectives.
(5) Cash accounting; the recording of the
transaction in which revenue and expense are reported (cash inflow and outflow)
in the period in which the related cash receipts and payment occur. The wide spread use of cash accounting in
public sector results from the government’s historically based requirement for
financial information that shows fiscal compliance.
(6) Capital Budget: This is the budget that sets out the proposed
acquisition of fixed (long-term) assets or projects and their finance.
(7) Depreciation: A non cash expense that reduces the value of
an asset as a result of wear and tear, age, or obsolescence. Most assets lose their value over time (in
other words, the depreciated), and must be replaced once the end of their
useful life is reached. There are
several accounting methods that are used in order to write off an asset’s
depreciation cost over the period of its useful life. Because it is a non-cash expense depreciation
lowers the company’s reported earning while increase free cash flow. Although, government accounting does not recognize
depreciation and this is one of the criticisms of the system.
(8) Encumbrance:
Is an expense, which is both
contingent and estimated. Obligations in
the form of purchase order, contact or salary commitments which are chargeable
to an appropriation and for which a part of the appropriation is reserved. These obligations cease to be encumbrances
when paid or when paid or when the actual liability is recorded. This term has no equivalent in the private
sector accounting since unperformed portions of executing contracts are not
recognized in the accounts.
(9) Estimated Revenue (Budget): If the accounts are kept on the accrual
basis, this term designates the amount of revenue estimated to accrue during a
given period regardless of whether or not it is all to be collected during the
period.
(10) Expenditure (Actual Expenses): this is expenditure chargeable to an
appropriation.
(11) Fixed Assets:
A long – term, tangible assets held for business use and not expected to
be converted to cash in the current or upcoming fiscal year, such as
manufacturing equipment, real estate, and furniture (also called plant)
(12) Functional Budget/Programme Budget: A budget that allocates costs (or inputs) to
particular functions or activities.
(13) Fun Accounting: This is basically operated on cash
basis. It is an accounting arrangement
whereby self-balancing set of accounts are provided for specific purpose. This system of accounting is usually used by
non-profit organization and by the public sector.
(14) Fund balance; the excess of assets of a fund
over its liabilities are reserves, except in the case of funds subject to
budgetary accounting where prior to the end of a fiscal period. It thus represents the excess of the fund’s
assets and revenues for the period over its liabilities reserves, and appropriations
for the period.
(15) Historical cost Accounting; the traditional
system of accounting that is based on valuations made in terms of the price
ruling when transactions take place. In
practice, this is modified by the concept of prudence and the possible
revaluation of fixed assets.
(16) Revenue (Actual Revenue): is that revenue
which are recorded on accrual basis, this term designates additions to assets
which:
- Do not represent the recovery of the
expenditure
- Do not represent the cancellation of
certain liabilities without a corresponding increase in other liabilities or
decrease in assets.
(17) Warrant:
Authority for expenditure from the consolidated Revenue fund covered by
the appropriation law in respect of recurrent budget or from the capital
development fund is the case of a capital budget.
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