Essay Sample on Differences Between Government Accounting and Commercial Accounting

Introduction

Accounting is the process of registering, classifying and summarizing economic events in a logical manner for the purpose of providing financial information for decision making. The accounting function for an entity and for society as a whole is to provide some types of quantitative information that the management and other users can use in making decisions. In order to provide relevant information, the public accountant must have a broad knowledge of the principles, rules, and norms that constitute the basis for preparing the accounting information (Account 2009, p.1). In addition, the professional must develop a system that ensures that the economic events of an entity are duly registered in a timely manner and at a reasonable cost. When auditing accounting data, what matters is to determine whether the recorded information adequately reflects the economic events that occurred during the accounting period. Since accounting rules are the criteria for evaluating whether accounting information is properly recorded, any auditor related to these data must also comprehend those rules widely.

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Within the accounting there are two sectors that are always mentioned, these sectors are the public in which the accounting of the governmental organizations is handled and the commercial one in which the accounting of the organizations is kept private. Public accounting is the technique that systematically registers the operations carried out by the agencies and entities of the public administration, that is, the identifiable and quantifiable economic events that affect it, in order to generate financial, budgetary, programmatic and economic information that facilitates the users making decisions. According to Sujit (2018, p. 1), government accounting "is the discipline that deals with the economy of public finances, whose operations it studies together and in detail to the effects of training and perfecting by the rational and experimental way (and with a view to the best compliance of its end) the administrative doctrine of it (Shrestha 2018, p. 1). Public accounting includes the study of the budget, of its total management, in the governmental action for obtaining and applying economic means for its development. Public finance is the center of this discipline that is integrated with registration techniques, control methods and control, and liability actions.

According to Puneet (2015, p.1), government accounting is the type of accounting that registers the financial operations of the entities and dependencies of the public administration. All quantifiable economic events that affect the State are part of the interest of government accounting. Through government accounting, the leaders in charge of the conduct of the State must be accountable to the competent agencies to show how they manage public money. There are several users of government accounting. Thus, among those are the legislature, investors, economic analysts, creditors, resource providers, financial analysts or international agencies. It should also be borne in mind that when talking about this type of accounting it is essential to determine that its structure is delimited by three elements, which are the principle of legality, the basic principles of government accounting and the particular rules based on the criteria prudential. Teeboom (2018, p.1) adds that among the fundamental characteristics that government accounting has to possess are the following: integrality of the registry and its coverage, uniformity, normative centralization, doctrinal framework, operational decentralization, accounting control of assets, operation in an integrated manner with other systems, and structuring based, among other things, on the data flow.

In the same way, government accounting is an essential tool for budget preparation. Although it depends on each constitution, the most usual thing is for the budget to be submitted to parliamentary debate. The information that allows defending or criticizing the budget comes from the balance sheets offered by government accounting. It is important to note that government accounting is governed by various laws and regulated by several institutions. The intention is that the current government does not take advantage of its position to use state funds according to their convenience and interests, but that the financial management is transparent.

According to Teeboom (2018, p.1), commercial Accounting is a field of General Accounting that is dedicated to the registry of all its operations. The most common is the recording of income and outflows of money. Commercial Accounting is known as the "Basic Accounting", for the registration of simple operations to buy and sell. Puneet (2015) adds that it is a method that classifies records and summarizes the operations generated by a trade with the aim of generating results that serve to see the stability or solvency of the company. Some of the functions of commercial accounting include: Indicate the monetary term of the content of debts, assets, and assets that the company has. Provides in a detailed and accurate way the profits and losses obtained in a given time. Provide requested content to properly apply planning, evaluation, and control, and prevents future contingencies and opportunities.

According to Teeboom (2018, p.1), the private audit has a scope of action that is the private sector, that is, the private sector. The public audit operates in the public sector, public finance. The public treasury and the private estate are of a different nature; consequently, the accounting is also different. The public sector has its own characteristics, and specifically, public accounting has fundamental differences with private accounting. Consequently, the same accounting standards are not applicable. There are no auditing standards of uniform application in the public sector approved by professional bodies if there are any for the private sector (Puneet 2015, p.1). The task of the state auditor, according to its scope of action, which differs from that of the private auditor, is framed by specific regulations, in addition to compliance with the professional accounting standards that are applied by adopting the standards. Government information on financial statements is much higher than in the private sector, in addition to having a different impact among users. These users of public sector financial information are much broader and more varied; they are the citizens to whom the public administrations must render an account of their actions. This category of users who take knowledge of the management of public resources requires that the information be relevant and reliable by requesting financial statements audited by experts that report the reliability and security of the information they analyze.

According to Shrestha (2018), government accounting is part of the accounting that applies to the government sector, which is regulated by a constitutional framework, a legal basis, and rules that make it different from the rules that govern private sector entities. The primary objective of government accounting is to contribute to the management and economy of public finances and for private sector accounting, the essential objective is to contribute to the economy of the entity, owned by shareholders. Shrestha (2018) adds that the financial information presented by the public sector must comply fully with the General Law of Government Accounting, among other laws, and its financial statements are oriented to inform about the application of the budget authorized by the federal government, in the accounting of the sector Private companies are informed about the progress of the business, its solvency, and the ability to generate profits for the owners. The budget for public entities represents formal and legal responsibilities towards citizenship, and in private entities, the responsibilities are oriented towards the benefit of the owners.

Sujit (2018, p.1) states that the information that is generated in government accounting is public domain, and therefore must be mandatorily informed about the results of public management, in the private company is the power of its administration to disclose the results of its operations that primarily interests those involved directly as the shareholders, owners of the company, unless they are listed on the national stock exchange. Government accounting is under the control of the Congresses or Legislative Assemblies in this case under the Superior Audit of the Federation, so it has the obligation to render accounts, within the private sphere this monitoring or control function depends on the type of company, and either by the Board of Directors or the General Assembly of Shareholders and, if applicable, external or internal audit. The resources with which the public sector works are previously authorized by the Federal Government and the capital with which a private company works is contributed by the owners or shareholders.

Teeboom (2018, p.1) adds that public finances contrary exists to provide certain services to the beneficiaries at their cost price, who are forced to pay this cost for reasons of residence, development of commercial activity and property. It is coercive, since individuals cannot be exempted from being part of it (contrary to what happens in private farms that are voluntary) and are of lasting existence, insofar as the public needs to which it owes its birth are enduring (Account 2009, p.1). In private accounting, the financial statements reflect the results on the sales and their distribution, while the public accounting reflects disbursements and the income obtained to meet them. The measurement of profits in private companies is relatively straightforward. The measurement of results in government is not; measuring products is not the same as measuring results, for example. One of the most challenging tasks for both auditors and quality experts is to define exactly what the results that constitute quality performance are.

Sujit (2018, p.1) adds that government accounting is located within the framework of the public sector where it operates, which is made up of public administration and public companies. The relations of government accounting with the Public Administration are very close and have a common subject: public finances (Teeboom 2018, p.1). Public accounting deepens what is related to the control of operations and everything related to the ways to ensure and make effective the responsibility of the intervening agents. The Public Administration carries out the analysis in matters of organization and management, seeking its improvement. The audit of public entities aims to evaluate the public management of entities through processes and management results and the application of public resources by public and private law entities. It is an important control instrument for the best allocation of public resources, contributing to detect and propose corrections of waste, improbity, negligence, and omission (Sujit 2018, p.1). In private entities, an audit is for the collection, study and systematic evaluation of the transactions, procedures, operations, and routines of an entity's financial statements.

Shrestha (2018, p.1) argues that auditing standards in the public and private areas refer to the person of the auditor, to the execution of the work, to the opinion of the audit profession and aim to regulate the exercise of the auditor's function, controlling thus the quality of the examinations and the reports made by them. The standards also establish guidelines and guidelines to be followed by the auditors in the...