Government vs. Private Sector - Coursework Example

Finance and Accounting: The Difference between Public and Private Sector Finance and Accounting There isa significant difference between public sector and private sector management of finance and accounting. In the “Government Finance Review,” Stephen J. Gauthier points out that as much as there are similarities in between the private sector and the public sector finance and accounting practices, some of the practices in the financial sector are not applicable to the private sector (Gauthier, 2010).

It is important to note that the accounting methods applied in the public sector and private sector accounting significantly differ. Financial management and accounting in the private sector is restricted to the Generally Accepted Accounting Principles (GAAP) accounting methodology. This set of practices, including double-entry accounting formula, is used in ensuring that uniformity and financial accuracy is achieved. According to Gauthier (2010), these methods can also be used in the public sector, but there is room for deviation to other methods in some cases such as during budgeting (Gauthier, 2010).

The application of accrual and cash accounting and budgeting basis is a great divide between the private and the public sector, with the private sector employing accrual accounting, while the public sector employing cash accounting and budgeting (Finkler, 2010). However, there is a constant development of bridging between the two approaches by most governments, with the view of attaining better financial information. The context of public and private sector finance and accounting management also differs in such a way that the private sector has more autonomy to make any financial and accounting decisions in order to achieve what ought to be achieved (Finkler, 2010).

On the other hand, the public sector financial and accounting is limited to rules and regulations that limit their reach in terms of incorporating practice to have ends meet. For instance, the Governmental Accounting Standards Board (GASB) Statement No. 20 restricts state and local governments to using private sector standards that were only issued prior to November 30, 1989, consistent with GASB guidance (Gauthier, 2010). ReferencesFinkler, S. (2010). Financial management for public, health, and not-for-profit organizations (3rd ed.). Upper Saddle River, NJ: Pearson Prentice Hall.

Gauthier, S. J. (2010). The Use of Private-Sector Standards by State and Local Governments. Government Finance Review, 26(1), 67.