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Public Sector Accounting - Research Paper Example

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Public Sector Accounting

In respect to accounting there are differences in objectives of accounting process between public and private sectors. In addition, this paper identifies some of the critical differences in accounting between public and private sectors. Amongst such differences identified is measurement of performance through profits, as well as rate or return as in the case of private sector, which is lacking in the public sector. Other than the critical differences, this paper identifies accounting differences that emanate from the financial control aspect, whereas legislators or parliament financially controls public sectors, private sectors are financially controlled by the shareholders. Another important difference identified is the aspect of spending as public sectors unlike private sectors do not have a choice but to spend. Lastly, the paper identifies the auditing aspect of accounting, which differs in these two sectors in respect to its objectives. From the discussion, the paper concludes that the differences in accounting stem from varied management and control aspects of public and private sectors. Introduction Public sector refers to national, regional and local governments, in addition to various institutional units that are governed and controlled by governments of different nations or economies. Private sector, on the other hand, is composed of institutions that are neither governed nor controlled by the government (Jorge, 2008). The management and control of such organizations lie in the hands of private individuals and not the government. Given the differences in management and control of the public and private sector, many other differences stem particularly with regards to operations, accounting, and investments. In terms of operations, whereas private sector is driven by the need to make profits, public sector is non-profit but is driven by ensuring that the citizens of a country obtain all the public goods and services at minimal costs (Kieso, Weygandt & Warfield, 2011). The following is an evaluation of the accounting differences between the public/government sector and private sector. Differences in accounting between the Public Sector/Government and Private sector Differences in accounting between the public and private sector stem from their management and control. Firstly, there are differences in the objectives of accounting between public and private sectors (Lienert, 2009). In private sector the objectives of accounting amongst other things include informing stakeholders about performance of the business, providing possible investors information, aiding management decision making, and increasingly informing regulators. Public sector on the other hand has different accounting objectives (Jorge, 2008). Amongst the traditional accounting objectives in public sector include providing financial summary, enabling a detailed comparisons of spending to be made with proposed budget, allowing identification of spending so as to ensure compliance with law and other legal authorities, and providing the basis for the next budget. Nonetheless, in the modern perspective this has greatly changed where public sector engages in accounting for the purposes of informing stakeholders, providing possible investors with creditworthiness information, aid in management, identifies assets and liabilities, as well as facilitates democracy transparency (Kieso, Weygandt ...Show more

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Public Sector Accounting Institution Date Executive Summary The following is a discussion of the accounting differences that emanate from public and private sectors. Evidently, business environment has two main categories of business entities: public and private sectors…
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