Page 181 - Account 10

2. Differences Between Government Accounting and
Business Accounting

As there are some notable differences between government and business organizations,
the objectives of maintaining books of account in both types of offices differ to some
extent. But the accounting, in both types of offices, must be based on the fundamental
principles of double entry system in order to make the complete records of the financial/
business transactions. In this sense, accounting may be studied under the following two
topics viz. (a) business accounting and (b) government accounting.
Basis Government Accounting Business Accounting
1. Meaning Accounting which is used by the Accounting which is used by the
government offices to keep records of business offices to keep records of
government transactions is known as business transactions is known as
government accounting. business accounting.
2. Prepare of The main purpose of the government is The main purpose of commercial
Account to provide administrative and financial firm is to perform business activities
service to the general public; so, it to earn profit. For this purpose, they
prepares accounts of government prepare Trading Account, Profit and
revenues and their expenditures. Loss A/c and Balance Sheet.
3. Budget Head It is based on budget. All expenses of It is not necessary to prepare all
government offices are pre-determined statements of accounts on the basis
on the basis of budget. Similarly, of a budget head. However, budgets
revenues are also projected by the are used to compare the actual
budget. performance with the budgeted
performance.
4. Rules and It has to be maintained as per the It is not based on government rules
Regulations government rules and regulations. and regulations; rather it is based on
the Generally Accepted Accounting
Principles (GAAP) evolved over the
years.
5. Basis level of It has the system of central level and It does not divide the accounting
Accounting operating level accounting. system.
6. Auditing The Office of Auditor General A professional auditor can audit
audits books of account kept under the books of account kept under
government accounting. commercial accounting.
7. Control It is controlled according to the It is controlled by the owner of the
financial act, rule and regulation of the business.
government within budgetary limit.
8. Purpose The main purpose of government The main purpose of business
accounting is to reflect the plans and accounting is to find out the profit
politics of the government in financial earned or loss suffered during a
terms. financial year.
9. Responsible It is responsible towards the people and It is responsible towards the owner of
the government. the business.

180 Aakar’s Office Practice and Accountancy - 10 Government Accounting System 181