INTRODUCTION TO GOVERNMENT ACCOUNTING

Government Accounting is of special significance in our country because of the fact that
the government has the largest volume of monetary transactions. Maintenance of detailed
government accounts is necessary to provide adequate information for different kinds of
Revenues and Expenses. This topic deals with various accounting problems concerning
Government Accounts. Objectives of Government Accounting
The various objectives of government accounting can be summarized as follows:
1. Providing Information about Revenues:
Government accounting aims to provide information about the revenues of the
Government during the year. The Government revenues can be classified into two
categories:
i. Tax Revenue
ii. Non-Tax Revenue
The information about both the types of revenues has to be sufficient in detail to
enable the Government to estimate the future revenues and decide about the possibility
of taking steps for any increase or decrease in revenue. This is possible only when taxes
and other revenues are segregated so as to provide information about each one of them
with sufficient detail.
2. Providing Information about Expenditures:
Government accounting aims to provide information about the expenditure of
different items. This is necessary because Parliament or the State Legislature, as the
case may be, will like to know whether the amounts spent by the Government on
different activities are within the limits sanctioned by it or not.
3. Providing Information about Loans and Deposits:
Government borrows heavy sums from different parties. Similarly, it lends money also.
Government Accounting provides information about the loans and deposits which the
government has to pay to its creditors and also debt due by others to the Government.
4. Information about Cash Availability:
This information is necessary to enable the government to run its operations smoothly.
Government accounting provides information about the present availability of cash,
 receipts and payments in near future. The reconciliation of the Government’s bank
account with its bankers is also necessary for this purpose.
Difference Between Government Accounting and Commercial Accounting
The Government accounting is different from Commercial accounting because of the
difference between the objectives of the Government entity and those of a commercial entity.
The main objective of commercial undertaking is to trade and make profit while the main
function of Government is to administer the country and to render various services. The
difference between the two can be summarized as follows:
Particulars Commercial Accounting Government Accounting
The accounts of a commercial
Government accounts are mostly
concerns are usually kept on
1. System of Accounting kept on cash basis under single
accrual system under double
entry system.
entry system.
Every Government entity
Every commercial entity prepares Government Account
prepares Trading, Profit & Loss (net result of income &
2. Final Accounts
Account and Balance Sheet at expenditure) and Statement of
the end of the accounting period. Balancing Accounts (Payment &
Receipt of cash)
All transactions are classified All transactions are classified
3. Classification of broadly into three categories of broadly into three accounts i.e.
Accounts accounts i.e. Real, Nominal and Consolidated Fund, Public
Personal. Accounts and Contingency Fund.
The functions of both of
4. Independence of maintenance of accounts and
Audit function is independent of
Accounts & Audit their audit are handled by the
the accounts functions.
Function Pakistan Audit & Accounts
Department.

General Principles of Government Accounting

The following are the general principles of government accounting:
1. Responsibility of Maintaining Accounts:
The responsibility of maintaining proper government accounts is that of the
Pakistan Audit & Accounts Department.
2. Accounting System:
Government accounts are generally kept according to Single Entry System on
cash
basis.
3. Government Commercial Concerns:
In case of commercial entities owned by Government, the accounts are
maintained on accrual system and according to the double entry system. The Trading,
Profit & Loss Account and Balance Sheet of the commercial concern is prepared.
4. Recording of Transactions:
In case of Government Accounting, the transactions are recorded in the initial
accounts and consolidated under different heads in such a form that the information is
available about the combined result of all the transactions that had taken place during
the period.
5. Classification of Income & Expenditure:
In Government Accounting, classification of income and expenditure is done
first according to the administrative activities and then according to their nature. For
example, in case of Revenue Account, expenditures are first classified under the
following heads:
i. General Services:
General services include administrative, fiscal, foreign defence, law &
justice services etc.
ii. Social Services:
Social Services include education, sports, arts & culture, health, welfare,
information and broadcasting services etc.
iii. Economic Services;
Economic services include agricultural & allied, energy, transport, and
communication services etc.
iv. Grants-in-aid and contribution;
Similarly, incomes or revenues are classified under the following heads:
i. Tax revenue:
Tax revenue includes income tax, property tax, sales tax, professional
tax, custom duty and stamp paper duty etc.
ii. Non-tax revenue:
Non-tax revenue includes interest receipts, fines, fees, dividend & profit
etc.
 Each item or income or expenditure is then further classified into several major
heads followed by several minor heads, sub heads and detailed heads.

6. Maintenance of Internal Accounts:

The maintenance of internal accounts is the responsibility of the concerned
authorities or treasury.
7. Combined Finance and Revenue Accounts:
A combined finance and revenue account of the State is prepared incorporating
summarizes of accounts compiled by the Pakistan Accounts & Audit Department and
other agencies. The account reveals the results of all government transactions arising
both in outside Pakistan.
8. Combination of Accounts & Audit Function:
In case of Government Accounting, the accounts were prepared and audited by
the Auditor General of Pakistan (DAGP). Both audit and accounts functions were
managed by the DAGP up to 30-06-2001. After this date, these functions were separated
under DAGP Ordinance, 2001 and CGA Ordinance, 2001. Now, the government
accounts are maintained by CGA and audited by DAGP.
Classification of Government Accounts
In order to facilitate control, the Constitution of Pakistan provide for maintenance of
the following accounts:
1. Consolidated Fund:
The fund comprises of the following:
i. All revenues received by the Government;
ii. All loans raised by the Government by issue of treasury bills, loans or by ways
and means advances
iii. All moneys received by the Government in repayment of loans.
Thus, the sources of consolidated funds are revenues, loans & advances and recoveries
of loans granted by the Government.
Appropriations out of the consolidated fund have to be made in the manner provided in
the Constitution. It involves submission of demands for grants in the prescribed manner
before the appropriate body i.e. Parliament
2. Public Account:
 This account or fund is maintained for receipt which does not go to the consolidated
fund. Public account is maintained in Fiduciary Capacity. records all transactions
relating to debt

(other than those included in the consolidated fund), deposits, advances, remittances
etc. the transactions under debt, deposit and advances in the public account are such in
respect of which the Government incurs a liability to repay the money received or as a
claim to recover the amount paid. The transactions under Remittance and Suspense are
booked in the public account only for a temporary period till they are transferred to their
correct accounts in the Consolidated Fund or Public Account. Some examples of Public
Account transactions are booked Provident Fund Account, Deposit received on Court
orders, Advances granted by the Government for Cost of survey marks and Pension
Contribution Fund Account etc.
Important Terms
1. Treasury:
A treasury may be defined as ‘Pay Office of the Government’. A district treasury
receives and pays money on the authority of the different government offices situated
in the districts. All government offices have to work only through Government Treasury
unless specifically authorized to deal directly with a bank. The treasury renders
complete detailed accounts of receipts and payments to the Accountant General of
Pakistan and all provinces. In the beginning, when the number of banks was not much,
the government used to keep its own treasury. Cash was received and disbursed there.
Thus, the treasury itself was also of the nature of bank. However, with the growth of
banking business in the country, the cash business of the treasury has been transferred
to the banks. A specified branch of the bank is attached to each treasury. There cannot be
more than one bank branch attached to the treasury.
2. Public Accounts Committee (PAC):
Chairman of Public Accounts Committee (PAC) is appointed by the Parliament
to scrutinize the appropriation accounts of the Government and the report of the
Comptroller & Auditor General of Pakistan in respect thereof. It is not an executive
body. It has no power to disallow any item or to issue any order even after most detailed
examination and the clearest evidence of r such disallowance. At the most, it can call
 attention to any irregularity or failure to deal with it adequately and express its opinion
thereon, records, its findings and recommendations. However, the main duties of PAC
can be summarized as follows:

i. The committee has to satisfy itself that:

a) The moneys shown in the accounts as having been disbursed were
legally available for and applicable to the service or purpose to which
they have been applied or charged;
b) The expenditure is in conformity with the authority governing it;
c) Every re-appropriation has been made from appropriation in
accordance with the rules framed by the competent authority;
ii. It has to examine such manufacturing, trading, profit & loss account and
balance sheet as the President of Pakistan may have required to prepare and
the relevant reports of the Comptroller & Auditor General of Pakistan;
iii. It has to consider the report of the Auditor General of Pakistan in cases where
the President of Pakistan requires him to conduct and an audit of any receipt
or to examine the accounts of store and stocks.
3. Supplementary Grant:
In the case amount authorized by the Parliament for a particular service for the
current financial year is found to be insufficient for the purposes of that year or where
a need arises during the current financial year for supplementary or additional
expenditure, for some new service not considered earlier, the statement showing the
estimated amount of the expenditure is presented to the Parliament. Such estimates are
called supplementary or additional demands for grant.
It may be noted that “a new service is not necessarily a new item of expenditure”,
it may be for a new policy, a new facility, a new scheme, a new program, a new activity
or a major change in the character of a continuing scheme.
4. Contingency Fund:
A fund meant for meeting unforeseen expenditure pending authorization of such
expenditure by the Parliament.
5. Voted Expenditure:
Such expenditures which can be increased or decreased through voting of
 legislatures in the Parliament i.e. all expenses on health, education, administrative,
defence and all expenses other than constitutional posts.

6. Charged Expenditure:
Such expenditures which are incurred for Constitutional Posts & their
Departments. The Government has to pay the same expenditures which are required by
the Constitutional Posts. These expenditures cannot be decreased through voting of
legislatures in the Parliament.
7. Constitutional Posts:
Constitutional posts include President of Pakistan or Governor of all provinces,
Speakers, Chairman Senate, Chief Justice of Pakistan, Auditor General of Pakistan and
Chief Election Commission of Pakistan