Public sector accounting primary objective is to ensure transparency and accountability of government and those they appointed over ministries, departments, and agencies. Of course, citizens need to know how their tax money was utilized. And international lenders and observers want to see how the funds they gave to the government were used. It is through government accounting that we can know all these facts. Below are seven objectives of PSA.
Know legitimate transactions
Public sector accounting is the means to ensure that transactions by government business enterprises (GBE) are legitimate. It helps reduce favoritism, nepotism, and racism in this section of the economy. When entities follow due process, the right thing will be done at the right time. Furthermore, expenditures must be duly authorized by those having authority to do so.
Check for compliance with laws and status
Government auditors check if MDAs or GBEs comply with laid down laws, statutes, and norms of the government. These laws, status, and norms are laid down in the financial regulation act, the constitution, appropriation bill, finance act, government budget, and others.
Planning of resources
Government accounting gives the executive arm the privilege to plan for the future. This is done through budgeting. Generally, the government uses incremental budgeting tools to plan how the economic resources of the nation will be utilized. Of course, failing to plan may lead to misuse of economic resources. Also, there are usually contingency plans by the federal government to meet unforeseen occurrences.
Controlling of resources
Planning aids controlling. It is from the plans of how resources are used that control measures can be set up. This makes government appointees such as the ministers and heads of departments can easily monitor how the resources allocated to them are utilized during a fiscal year.
Preparing and presenting reports
One important objective of government accounting is reporting. The application of PSA helps preparers of those statements to present them fairly. They also ensure that the information presented is relevant to all users.
Transparency and Accountability
Taxpayers and the international community require transparency and accountability of economic resources that are placed under the responsibility of the government. The objective of public sector accounting is to ensure that these resources are effectively and efficiently used. And that all users are properly represented in those reports.
Cost and benefit analysis
Information provided through government accounting can be used to carry out a cost-benefit analysis. A project’s net present value can be calculated. And viable projects are accepted while not feasible ones are rejected. This is done using capital budgeting tools which help accept projects whose benefits are higher than costs.
The above seven objectives of public sector accounting reveal that government businesses must comply with accounting principles. Also, transparency and accountability are necessary to achieve the objectives of the government.