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GOVERNMENTAL ACCOUNTING
COURSE
Introduction to
Governmental Accounting
DR. IBRAHIM MENSHAWY
LECTURER OF ACCOUNTING
FACULTY OF COMMERCE – KAFRELSHEIKH UNIVERSITY, EGYPT
CHAPTER 1
Ph.D. UNIVERSITI TEKNOLOGI MALAYSIA (UTM), MALAYSIA
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Learning Objectives
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Governmental Accounting Definition
and It’s Subsystems
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
Governmental Accounting Definition and It’s Subsystems.

Unique Characteristics of G Entities And G Accounting.

Objective of Governmental Accounting.

Governmental Entities Levels in Egypt.

Similarities & Differences Between Profit-seeking and GE.

Users and Uses of Governmental Financial Information.

Features of Governmental Accounting in Egypt.
Accounting Definition

Accounting
is
a
financial
information system that records
economic
events
(financial
transactions) and communicate
information to interested users.
Therefore, accounting consist of
three
main
activities
RECOGNITION,
MEASUREMENT,
AND DISCLOSURE.

Accounting
is practiced by
business entities which include
profit-seeking companies (private
and public sectors) and non-profit
and governmental entities.
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Governmental Accounting Definition

According to the Egyptian Law 127 of 1981 which
governing the Governmental Accounting it can be
defined as a group of rules and regulations that are
applied in governmental entities to prepare and
implement the state budget, in addition to
recording and classifying financial transactions
occurred by these entities to prepare the financial
statements and final accounts.

A complete government accounting
consists of the Three sub-systems as follows:
system
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Governmental Accounting Definition
and It’s Subsystems
Government
Accounting
System
Budget
accounting
subsystem
To track the revenue collection and the use of
the budgetary resources at the various stages
of the spending process.
Financial
accounting
subsystem
To recognize and measure the consequences
of actual transactions and events which
affect the government’s finances.
Cost
accounting
subsystem
Unique characteristics of G entities
and G accounting
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Characteristics of Governmental Entities
To determine the cost of producing public
services.
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
Absence of profit motive but mainly concerned with providing essential
services to the society.

GE are mainly public ownership.

Capital concept in GE is not excited and it replaced by public funds.

Expenditure in GE is similar to expenses in concept but different in use.

Accounting matching concept in GE is not required.

Decisions made – directly or indirectly – by voters' representative.
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Unique characteristics (continued)
Objective of Governmental
Accounting
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
It includes both financial control and pre- & post- internal check in order to
maintain assets and resources owned by GE.

There are rules for preparing and implementing the state budgeting.

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Based on the above discussion there are several of GA are listed as follows:
Characteristics of Governmental Accounting
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1)
to measure the results of GE activities (based on the general budget) and
communicate these results to the interested users for controlling and decision
making.
There is no direct relationship between revenues and expenditure in GE.
2)
Different governmental levels take the decisions about how much to spend, and on
what to spend.
To provide and communicate the necessary data and information to determine
financial positions, formulating policies, and making decisions.
3)

Governmental Accounting provides key information to national decision makers to
manage the public expenditure and how to finance these expenditure.
To Apply the financial controls and pre- & post- internal check for the GE funds or
the funds they manage, whether these funds are revenue, assets or rights.
4)
To Rationalize the GE expenditure.

The state budget can be considered a major device of helping national decision
maker to administrate each expenditure and coordinate the national activities.
5)
To Monitor the GE commitments and following up on their fulfilment.
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Governmental Entities Levels
According to the Egyptian Law 127 of 1981, the GE are divided to Three
levels as follows:
Central
Which provides non-profit services such
(General) GE
ministries.
Level

Governmental
Entities Levels

Similarities to the Private Sector
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Local GE
Level
Which produce some of the functions of
governmental polices at the local level such
as Governorates, cities, districts and villages.
Public G
Organizations
Which provide services to the society
with/without low price such as post offices,
railways and public transportations ….. Etc.
Besides these three levels there are several special funds and special accounts
that are created under special laws and special presidential decisions.
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1)
Operate in the same economy and compete for same
resources: financial, capital, and human
2)
Acquire & convert scarce resources into goods & services
3)
Provide goods and services, many of which may be similar
4)
Use of accounting & other information systems
5)
Need to operate economically, effectively, & efficiently
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Differences from the Private Sector
Differences from the Private Sector
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 Organizational

Organizational objectives

Sources of financial resources

Methods of evaluating performance and operating results
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objectives
GE
Businesses

Operating Motive: maximize
income from revenues and
other resources

Operating Motive: maximize services
provided from revenues and other
resources

Operational
Focus:
report
quarterly but look to the longterm as well

Operational Focus: operate on annual
budget, so current year is of primary
importance
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Differences from the Private Sector (continued)
 Sources
of Financial Resources
 Sources
GE
Businesses

2.
Licenses, permits, and Fines
3.
Donations
4.
Appropriations and grants from other
governmental entities
of Financial Resources

Budget – allocates resources to functions

Restrictions placed by providers: typical of grantors, taxes for specific
purposes, & debt proceeds

Holding public officials accountable for actions
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Differences from the Private Sector (continued)
 Evaluating
Differences from the Private Sector (continued)
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 Evaluating
Performance & Operating Results
GE
Businesses
In
business,
continuing
a
product or service determined
by
the
success
in
the
marketplace.

Profit not a motive and frequently
cannot be measured

Services not found elsewhere so there
is no competition. The services and
goods needed are provided to all
constituents regardless of their ability
to pay for these goods and services

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GE Resource Allocation Mechanisms
Businesses raise resources  Governments raise resources from sales or
debt transactions – typically no distinction
from sales or from capital
made in sources.
stock & debt transactions –
must account for different  They have Unique Sources such as:
sources separately.
1. Involuntary contributions – taxes! (e.g.,
property, sales, and income taxes)
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
Differences from the Private Sector (continued)
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Face rules and regulations not found in
private sector.







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Performance & Operating Results
Special Regulations & Controls Applied to GE
Organization structure – form; board composition; number & duties of
personnel
Personnel policies & procedures – who has power to appoint or hire
personnel; tenure; termination policies; promotion policies
Sources of financial resources – types and amounts of taxes, licenses, fines or
fees; procedure for setting user charges
Use of financial resources – purposes, including legal restrictions; purchasing
procedures; budgeting methods
Accounting
Financial reporting – type & frequency of reports; format; recipients
Auditing – frequency; who performs; scope & type; time & place
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Financial Report Users and Uses
Users
The citizenry

Comparing results with legally adopted budgets

Legislative and
oversight bodies

Assessing financial
operations
Investors
creditors
and
condition
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Governmental Accounting in Egypt has some features such as
Uses


Features of Governmental Accounting
in Egypt
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and
results
Using the cash basis in measurement of current budget items (revenues
and expenditure) while it uses the accrual basis to tracking the accounting
of investment budget items which called the modified accrual basis.
2)
There is no depreciation of fixed assets is computed.
3)
There is no calculation is made for provision and reservation.
4)
There is no preparation for balance sheet is required.
of

Assisting in determining compliance with financerelated laws, rules & regulations

Assisting in evaluating efficiency & effectiveness
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1)
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(To be continued)
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