Governmental accounting

Government accounting refers to the process of recording and the management of all financial transactions incurred by the government which includes its income and expenditures.

Various governmental accounting systems are used by various public sector entities. In the United States, for instance, there are two levels of government which follow different accounting standards set forth by independent, private sector boards. At the federal level, the Federal Accounting Standards Advisory Board sets forth the accounting standards to follow. Similarly, there is the Governmental Accounting Standards Board for state and local level government.

The objectives for which government entities apply accountancy that can be organized in two main categories:
- The accounting of activities for accountability purposes. In other words, the representatives of the public, and officials appointed by them, must be accountable to the public for powers and tasks delegated. The public, who have no other choice but to delegate, are in a position that differs significantly from that of shareholders and therefore need financial information, to be supplied by accounting systems, that is applicable and relevant to them and their purposes.

- Decision-making purposes. The relevant role-players, especially officials and representatives, need financial information that is accounted, organized and presented for the objectives of their decision-making. These objectives bear, in many instances, no relation to net income results but are rather about service delivery and efficiency.