TABLE OF CONTENTS
OF THE STUDY
OF THE PROBLEM
OF THE STUDY
OF THE STUDY
AND LIMITATION OF THE STUDY
OF RELATED LITERATURE
2.2 HISTORICAL DEVELOPMENT OF GOVERNMENT
OF CASH AND RECORDING MEDIA
METHODOLOGY AND DESIGN
POPULATIONS OF THE STUDY
OF SAMPLE SIZE
OF DATA COLLECTION
FOR DATA ANALYSIS
AND DATA ANALYSIS
SUMMARY OF FINDINGS, CONCLUSION AND
1.1 BACKGROUND OF THE
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 enormous 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.
the public sector has received such a wide attention from scholars that the
field of public sector accounting scans to be neglected.
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
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
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
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?
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
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
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:
determine the extent to which the sample Ministry has installed an accounting
determine the factors that promote or
constrain the accounting system of the sample ministry.
determine the impact of the accounting procedures of the sample ministry upon
its financial reporting.
make recommendations based on my findings.
1.4 IMPORTANCE OF THE STUDY
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 public’s, the government as well
as the governed.
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.
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.
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.
potential researcher in this aspect of accounting will find this research paper
a very reliable reference base.
Three dominant questions being
reviewed by this research include;
the accountancy/accounting system in the public sector effective and adequate?
the accounting system in the public sector provide for proper financial control
and accountability of stewardship?
the accounting system in the public sector provide useful information for the
effective control and management of government operations?
1.5 SCOPE AND LIMITATION OF THE STUDY
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.
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.
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.
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.
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.
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.
was part of the reason why I had to limit my work to fewer staffs than was
1.6 DEFINITION OF TERMS
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:
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
(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.
entity is in the accounting and auditing, banking, commerce and finance and
corporate, commercial and general law subjects.
entity appears in the definition of the following terms; accounting change,
reporting entity, combination, fund and accounting policies.
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
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
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
Budget: This is the budget that sets out
the proposed acquisition of fixed (long-term) assets or projects and their
(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
(10) Expenditure (Actual Expenses): this is expenditure chargeable to an
(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
- 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.
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.