What is government accounting?
Government accounting is a broad-based term that describes the specific accounting functions of public sector entities in the United States (US). Government accounting principles are used by federal, state and local agencies that are in the public sector. Federal government entities generally follow accounting principles or guidelines developed by the Federal Accounting Standards Advisory Board (FASAB). State and local governments may be required to follow accounting principles and guidelines developed by the Government Accounting Standards Board (GASB).
According to its website, FASAB was created in 1990 to develop specific accounting standards and principles for the US government. FASAB works closely with the Congressional Budget Office, the Secretary of the Treasury, the Director of the Office of Management and Budget, and the US Comptroller General to develop government accounting standards. These bodies can also assist in the election of directors who direct FASAB's specific accounting activities.
The GASB is an extension of the Financial Accounting Foundation (FAF) and the Financial Accounting Standards Board (FASB). The GASB is responsible for providing guidance to state and local government entities on the application of Generally Accepted Accounting Principles (GAAP). The GASB also attempts to improve reporting capabilities for state and local entities regarding relevant financial information. Providing audit guidance for finance functions is another important part of government accounting.
Government accounting typically uses funds, budgets, appropriations or fees when recording and reporting financial information. Fund accounting separates money received by government entities into separate accounts for use in government operations. These funds are usually tied to government projects such as infrastructure, maintenance, school services, utilities or other miscellaneous government expenditures. Budgets are developed to help federal, state, and local government entities determine financial means for future periods. These budgets are usually created from the previous year's information. Government entities also try to project the money needed to pay for future services and determine whether tax increases are needed to pay for those services.
Appropriations occur when government entities specifically set aside money for certain purposes. These credits generally represent a specific use for funds received by a government entity. Once a government entity appropriates money for a specific use, it is generally not allowed to change the appropriation request.
Liens are specific uses for revenue collected by the government and usually occur before the government collects tax revenues or tax revenues from citizens. Governments typically use fees for commercial contracts, equipment purchases, payroll or other items specifically needed to run the government entity.