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Large-scaled countries will lead to increase in the number of activities and even some changes in patrimuan. So it is an inevitable obligation to use patrimuan accounting. Modern government accounting systems are classified as Constante accounting system and Logismography accounting system. This system includes both budget accounts and asset accounts. System was founded in accordance with the principle of recording revenues and expenses in the budget in accrual phase. All transactions are recorded in accordance with bilateral recording method.
Cash book and detailed book of revenues and expenses are recorded in the system. Cash book is used for monitoring the cash movements as usual, while detailed book of revenues and expenses is used for recording revenues and expenses in the relevant accounts in accrual phase. This system includes budget accounts and asset accounts. Since tangible asset accounts are also used in this system, there can be decreases and increases in the tangible assets of the government [ 7 ].
Loss and profit balances of all the accounts are recorded in the capital account at the end of the year. Net balance of this account represents for the net assets of the government [ 11 ]. Logismography accounting system also includes budget accounts and asset accounts just in Constante accounting system. Logismography system can deliver budget accounts and asset accounts any time.
It is also important and outstanding in that it brings new concepts to government accounting. It is one of the most important systems as it considers the cost of government transactions [ 16 ]. On the other hand, officer account was created in order to notify the status of the assets of civil servants who keep and manage these assets on behalf of the government in accordance with specific laws, decrees, and regulations.
So accounts of these officers are collected under the account of government officers [ 15 ]. When political power had only a few duties in national economy in the past, there was not much need for information for economic administration. But today, political powers in some developed countries shoulder important roles in order to facilitate socioeconomic development of their communities for a direct management of economy. So it is of high priority and high importance for an efficient government finance management to adapt to new conditions in obtaining the necessary information.
It is obliged to create a method which can respond to changes arising out of lack of information on account of relationships among the nations [ 17 ]. It is impossible to compare or consolidate financial reports which are produced in different accounting and reporting methods. For example, it would not be possible to consolidate EU financial statements if EU member countries applied different accounting systems.
So international organizations launched studies in order to create the same accounting standards across the world. During these studies, there has been a shift from cash basis government accounting to accrual basis government accounting in government accounting systems [ 18 ]. Starting point of modern government accounting is the cash basis-oriented accounting system. Accrual basis accounting system which is the fundamental of modern government accounting system records all kinds of financial transactions regarding all the assets and liabilities, including tangible assets, regardless of collection and payment.
Thus, there has been some studies recently to develop an accrual recording system which is recognized by all financial transactions which have already emerged or will emerge in the future including tangible assets of the government [ 19 ]. While recording methods in government accounting accept cash basis at one side and accrual basis at another side, there are other bases as well which are close to both sides. In other words, various regulations were developed within the specified boundaries in order to see the best accounting and reporting status of an asset [ 20 ].
Cash basis government accounting records are transactions arising out of cash purchases. In other words, financial transactions and cases are recognized upon purchasing or payment of cash. Cash basis accounting is not interested in when services and benefits which are derived from transactions have emerged.
Financial reports lose budget revenues and expenses, cash inputs and outputs, and opening and closing cash assets in such an accounting system [ 21 ]. Cash basis accounting system is easy to understand and manage as it includes simple transactions. Since its scope is limited to cash flows, it does not serve for transparency and accountability purposes.
So it is required for cash basis government accounting to include or be supported by commitments and liabilities arising out of budget applications at least. Moreover, cash basis government accounting can be strengthened through accrual budget accounting and recognition of some assets and liabilities such as security assets and deposit securities advances and financial assets [ 22 ]. Since its scope is limited to cash flows, it does not serve for transparency and accountability purposes [ 23 ].
Furthermore, it provides very little information which is beneficial for finance management as it is mainly focused on payments. It is not a single basis for performance evaluation in terms of prudence and efficiency or achievement of the targets, either [ 24 ]. It is possible to suggest the lacking parts of cash basis government accounting system [ 25 ]. Not making up a balance sheet : In this system, there is no balance sheet made up because there is no data regarding the payables, moveable and immoveable assets, liabilities, and equities of the government to make up a balance sheet.
The fact that cash basis system does not record them and does not create data leads to some negative results. So users cannot obtain sufficient data regarding the financial information of government administrators, and they cannot make assessments. Not revealing economic results : In this system, budget revenues, expenditures, budgetary and off-budget collections, and payment transactions are reported only based on cash flow.
Activity reports cannot be produced to indicate the results of activities of the institutions. So economic results of that institution cannot be indicated. Not having economic and financial performance indicators : In this system, economic movements cannot be estimated. So there are some difficulties in evaluating the financial and economic performance of the institution because of lack of information in comparison of revenues and expenses of that period. Consequently, performance indicators cannot be determined. Not producing information on service costs : Service cost information, pricing policy and control, and performance evaluation are beneficial and necessary instruments for decision-making process and government contract policies.
However, since there is no necessary information which can be obtained regarding expenses and service cost in cash basis accounting system, it is not possible to get necessary information regarding decision-making process because revenues and expenses are recognized when the collections are made, not at their accrual time. Moreover, not recording the moveable assets and not calculating the amortizations are other reasons which make determination of service cost impossible. Not fulfilling the liability of accountability and financial transparency : Liability of accountability, as a requirement of democracy, is the responsibility and necessity of making inquiries and calling somebody to account regarding fulfillment of the duties and use of government sources by people who are elected by the government and people who are appointed by these elected people.
Financial transparency is the explicitness in which government accounts and economic targets can be observed by the government. Since government accounting is a method which records the use of all moveable and immoveable assets of the government as well as its sources and produced financial reports accordingly, it is the main element of accountability. However, this accounting system cannot produce necessary data for the fulfillment of liability of accountability and cannot produce the relevant reports.
This system cannot sufficiently help financial transparency because it does not produce detailed and accurate financial data on the issues which are required to be within the knowledge of government. Opinions of supporters and non-supporters of cash basis government accounting system can be summarized as follows [ 14 ]:. Cash basis government accounting system is the simplest method which is used for monitoring government accounts.
Supporters of this system suggest that it easily determines the impacts of financial transactions on economy. Moreover, since the treasury works as a banker, this system enables evaluation of cash position which is required to be known. The most important function of cash basis accounting system is fund control and determination of liabilities. System also carries out the functions of feasibility and determination of economic impact through expenditure limitations in the short term.
On the other hand, non-supporters of cash basis system accept that cash basis system may have strong impacts on economy, but these impacts cannot be measured unless demands or liabilities are paid to the government. They believe that cash basis system is open to abuses, for example, postponing the payment of debts of current fiscal year to the upcoming year and going into unmatured debts such as advance payments and budget securities until the end of the year.
Cash basis recording method, as it is explained above, includes information about the payments within the current fiscal year. However, since these payments do not reflect the actual value of real activity and used government sources, they are not accepted as expenses in reality.
Moreover, since accounting records are recognized when the payments are made, not when services and goods are received, this method does not give any information regarding demands arising at the end of the year against a government administration. In cash customized government accounting, financial transactions are recorded when the actual payment and collection are made regardless of their accrual periods just like in cash basis government accounting system [ 21 ].
The most important characteristic which differentiates cash customized accounting from cash basis accounting is that accounts are not closed by the last evening of the fiscal year; they are open for a specific period of time, generally one month, for the records of transactions of the previous fiscal year.
Transactions of the previous period, especially invoices of the budget year, are accepted, and their accounting records are held within this additional period. In this method, transactions are recorded in the accounting records of that fiscal year, and they are reported in the relevant period [ 24 ]. In accrual customized government accounting, transactions are recorded when an economic value is created, changed, exchanged, transferred, or eliminated regardless of time of cash flows. The most important characteristic which differentiates accrual customized government accounting from accrual basis is the scope of accounting transactions.
In this basis, transactions regarding such tangible assets as land, estate, building, vehicles, inventories, forests, and monuments are not included in accounting system, and they are not reported. Therefore, it is easier to understand, apply, and manage compared to accrual basis accounting system because such transactions of determination of tangible assets, amortization, and reevaluation are excluded from accounting.
Compared to cash basis, it does not produce deficient information, it records economic transactions as soon as they emerge regardless of cash flows, it is not budget oriented, it records and reports accrued receivables and payables, it creates a basis for activities and performance check, and it records and reports commitments and guarantees which may lead to liabilities in the future [ 7 ].
General characteristics of accrual customized government accounting and its distinctions from commitment basis, cash basis, and cash customized government accounting methods are as follows [ 24 ]:. It records commitments and liabilities, so it is one step further than commitment basis. It does not have the weaknesses of altered cash basis as inherited from cash basis in the production of information. Since liabilities are recorded when they are recognized, there is no need for set-off period in order to enable the principle of periodicity in this basis.
It is also in conformity with cost accounting elements which are required by activity and performance audit. Accrual basis accounting fundamentally aims at comparing expenses and revenues accrued within a specific period of time and controlling the existing sources and liabilities to be fulfilled by the end of the period. Accrual accounting was principally developed in order to make external financial reporting by high profit-oriented private enterprises. Government enterprises also experienced some changes as a result of distinctions of accrual basis.
However, the idea that it could be applied in noncommercial sectors of the government had recently been very effective. While it was of high priority to increase profit performance in commercial enterprises, accrual accounting applications would be an instrument of decision-making for the managers in nonprofit governmental organizations and increase the management performance [ 26 ]. Liability of accountability, improvement of management, and providing savings would be enabled by increasing the management performance.
Especially after , it is seen that governments made progress in the issue of accrual accounting and started financial reporting, management systems, government financial reporting, and budgeting processes in accrual basis [ 27 ]. During accrual, transactions are recorded when they are recognized regardless of time of cash flows. Revenue account indicates revenue transactions which accrued throughout the fiscal year regardless of their being collected in cash and which are required to be recorded as revenues in accordance with the principles of accounting which are universally accepted, while expense account indicates sum of expenses which accrued throughout the fiscal year regardless of their being collected in cash.
Given that, accrued revenues and expenses are included in the accounts and reports of their fiscal year. Such an approach records and reports these economic transactions in their fiscal year. So periodic financial reports exactly reflect the financial transactions regarding the relevant activity periods [ 28 ]. When there is an entitlement of using the sources, which are expected to provide benefit to the organization in the future, accrual basis government accounting system regards them as an asset and records them.
Similarly, liabilities of the organization against third parties which are expected to be fulfilled in the future firm, conditional, guarantee, etc. So if there is a positive difference between assets and payables, they are recorded and reported as the equities of the organization net value [ 29 ]. Important factors in the emergence of accrual accounting are to increase accountability, determine financial status of government sector better, and develop reporting studies as well as financing current expenditures by the taxpayers and making contributions to the assets to provide intergenerational equality.
Being considered within the liability of accountability, accrual accounting provides large benefits to the governments with regard to showing actual costs of the use of sources [ 30 ]. When comparing with the other government accounting recording methods, accrual basis government accounting has some distinctions as follows [ 25 ]:. Making up a balance sheet : Balance sheets which are prepared in accrual basis system and which include assets, payables, liabilities, and equities put forward the financial status and performance of the relevant government organization clearly, explicitly, and accurately instead of charts which are far beyond giving information prepared in cash basis government accounting.
With the help of this characteristic, accrual basis government accounting system helps decision-making mechanisms of government management and external users. This system includes all payables and liabilities of the general government sector or the relevant government organization. In other words, it includes all economic results of the services and activities of the relevant government organization.
It also helps us to evaluate the capacity of covering payables and liabilities of the government sector in the future through information on financial status obtained from balance sheet. Preparing an activity sheet : On the contrary to cash basis government accounting, accrual basis system can put forward and report the results of activities and services of the general government sector or the relevant government organization.
Therefore, it gives us the opportunity of determining the costs of services or activities of the government and the relevant government organization. So it becomes possible to make a performance evaluation. Determining performance indicators : It is of high importance to record accrued revenues and expenses with regard to financial decision-making process and performance evaluation.
In accrual basis government accounting, indicators and criteria can be determined for measuring economic and financial performance by using the produced reports. There are some changes and adaptations experienced in the implementation of accrual basis government accounting system to overcome its difficulties. Approaches and modifications which were developed because of the obligation of this implementation in some countries using accrual basis government accounting system are as follows [ 31 ]:.
Approach which supports that assets and liabilities are recorded in accrual basis while revenues are recorded in cash basis because of difficulty in calculating the amount of collection. Approach which supports that all the liabilities are recorded in accrual basis except for some payable items social security payments funded by budget revenues.
Approach which supports that all the assets are recorded in accrual basis except for some asset items infrastructure, defense and cultural assets, etc. Approach which supports that all tangible asset items are recorded when they are acquired manufactured or constructed.
Financial reports which are produced in accordance with accrual basis accounting system include revenues, expenses including amortization expenses , assets financial assets, physical assets, capital assets , liabilities, and other economic flows. Accrual basis accounting records and reports all the program costs including amortization expenses. So it creates a strong basis which measures whether or not government sources are used efficiently and economically or in other words whether or not government managers are good managers with good performances [ 22 ].
Developments in government accounting were principally brought in as a result of the need for creating financial statistics and reports for the governments by international financial institutions such as United Nations, OECD, IMF, World Bank, and regional economic and political units such as European Union. Since it is impossible to compare and consolidate financial reports that are produced in various accounting reporting systems, it has become necessary to make adjustments which will enable comparison and consolidation in the field of financial statistics and reporting [ 7 ].
International organizations and institutions, economically developed countries, and especially European Union carry out important studies in the field of government accounting in international level. SNA93 was founded in order to establish standards and rules regarding measurement of national economy such as classification of national economies in corporates, sector and subsector level, flows, rules of stocks and accounting, production account, income distribution, capital account, financial accounts, balance sheet, economic activities with the foreign world, changes in prices and values, population and labor force inputs, and functional classification which are prepared by the European Union, International Monetary Fund IMF , Organization for Economic Co-operation and Development OECD , International Bank for Reconstruction and Development IBRD , and United Nations UN jointly.
This system includes principles, which should be taken into consideration while creating systems of accounting and reporting with regard to issues specified above [ 28 ]. SNA93 aims at handling scopes and definitions which have recently emerged regarding economy and removing the difference between definitions and scopes of these concepts which are observed in the reports and governmentations of various institutions and organizations [ 32 ]. SNA93 is composed of a set of meaningful, consistent, and integrated set of macroeconomic accounts, balance sheets, and statements based on a set of concepts, definitions, classifications, and accounting rules, which are internationally accepted [ 33 ].
In this regard, this system aims at recording an economy in full [ 34 ]. There were important developments in macroeconomic concepts across the world especially after World War II. Many economists were satisfied with a few economic variables in the past, while they need more detailed economic data in statistical analyses today. Collection of this data is only possible by collecting more detailed statistical data. So current System of National Accounts is a complicated system which is composed of many economic variables which are associated with each other beyond calculating gross domestic product today.
There is too much detailed information in the accounts in System of National Accounts SNA93 depending on the rules of economy and perception of their operation manner. Moreover, these accounts provide more comprehensive and detailed records about economic relationships between complicated economic activities and various economic elements within an economy [ 32 ].
Government Finance Statistics Manual GFSM is a regulation which is prepared by IMF with the participation of the experts from such countries as Australia, Canada, America, and the USA which made progress in the field of accrual basis accounting and reporting as well as International Bank for Reconstruction and Development IBRD , United Nations, Organization for Economic Co-operation and Development OECD , and European Commission and which aims at preparing government financial reports such as balance sheets and activity reports as well as classifying and reporting stocks, liabilities, revenues, and expenses in the same manner in every country in accordance with the accrual basis.
It includes points which should be taken into consideration while creating accounting and reporting systems especially such as the classification of assets, revenues, and expenses with regard to its scope and rules. GFSM fundamentally aims at creating a comprehensive concept and an accounting framework which enable analysis and evaluation of financial policies, as well as the performance of general administration, in specific terms, and government sector, in broad sense [ 35 ]. Basic definitions, concepts, and classifications in GFSM—regardless of the conditions in the country where they are applied—are based on economic ideas and principles, which are universally validated.
So GFSM can be applied on all the economies regardless of corporate or legal structure of the country where it is applied, complexity of its statistical system, its accounting system, or expansion of its government administration. Unfortunately, some sections of GFSM will not represent for the same meanings and results for the countries, which have important differences in terms of administrative and economic structure.
These sectors are defined based on corporate units, which can acquire assets, go into liabilities, and deal with economic activities on their own. An important difference of GFSM from SNA93 is that it is focused on financial transactions of Government System of Financial Statistics such as taxes, expenditures, and payables, while it also includes production and consumption of goods and services of System of National Accounts [ 35 ].
European System of Accounts ESA95 is a study prepared by EUROSTAT, a sub-institution of the European Union, carrying out studies in the field of statistics aiming at creating statistics, which can be compared and consolidated in the member states and candidate states of the Union at the same level. ESA95 was prepared and published in complete conformity with SNA93 which is a worldwide guidance regarding national accounting systems. However, ESA95 is heavily focused on the provisions of European Union as well as information and data, which are required in integration.
Just like SNA93, ESA95 also enables uniformity in concepts and classifications of such various economic and social statistics as employment statistics, production statistics, and foreign trade statistics. So ESA95 is a core reference for the European Union and member states regarding economic and social statistics. Framework of ESA95 is composed of two basic sets of table [ 36 ]:. Current accounts include acquisition, distribution, redistribution, and the use of revenues for final consumption.
These accounts also enable saving calculation, which is a necessary transaction for saving capital accounts. Saving capital accounts analyze changes in the assets and liabilities of different units and enable recording of changes among net values differences between assets and liabilities. Balance sheets indicate assets and liabilities of different units as well as net values as from the beginning and end of the fiscal year.
The International Federation of Accountants is the most executive and comprehensive organization of the accounting profession in the world.
It carries out global studies and provides services in the field of accounting through various subdepartments, councils, committees, and independent advisory boards. As it is specified in the decree of the organization as well, it fundamentally aims at providing service for government interests, strengthening the profession of accounting across the world, and making contributions to the development of international powerful economies [ 37 ]. These studies are recognized by international financial institutions, regional economic and political unions, and developed countries.
There are 21 accounting standards that are published by IFAC so far, and the new ones are under work for the time being [ 19 ]. Aims of government financial statements are classified in two categories in the relevant standard [ 37 ]:. Providing information regarding sources, assets, and changes in them as well as results of government works.
Providing necessary data in order to analyze cash flows which can emerge in the future. These activities are not so different from each other. The first point to be considered is the issue of scope of government accounting. National economy is classified in sector level in the international studies, which are carried out in order to determine the scope, so government accounting system is based on social security institutions as well as local and central administrations [ 22 ].
Many countries shifted from cash basis accounting system to accrual basis accounting system as a government accounting method in order to give a response to the pressures regarding efficiency and effectiveness of government sector. However, some other countries rejected this change because they supported that harmful and beneficial aspects of this system varied depending on the special cases of the countries [ 39 ]. In this regard, we firstly examined countries which had important developments in shifting to accrual basis accounting system as it threw light upon the developments in the world and which made the first applications of this system.
After explaining government accounting applications in the world, we detailed government accounting applications in Turkey. It is remarkable that countries shifted from cash basis to accrual basis in the applications of government accounting in the world. Even though some countries did not approve this shift, they still advocate its benefits. In this section, we will brief the exemplary applications in some countries and explain the implementation of government accounting systems by the countries.
Developments regarding government accounting which started in the s were not still completed at the beginning of the s. Countries which started to work on this issue were mainly in designing or conceptual phases in [ 20 ]. However, government departments in New Zealand shifted to accrual basis in the issues of budgeting and accounting in , and New Zealand became the first country to produce government accounts in accrual basis in A government reporting was carried out in to include approximately institutions ranging from the largest government enterprise to the smallest primary school including all assets of the government.
New adjustments were brought in the operation of budget system through Liability Insurance Act of Through these adjustments, combined plans were made which included the ministries in strategical areas education, health, social aid, social security, environmental protection, and economic development after [ 40 ]. When the government shifted to accrual basis accounting, it had the competence of preparing balance sheets which can be consolidated and had the opportunity of calculating the actual value of its assets for the first time.
Prestige of financial policy in New Zealand increased provided that accounting and budgeting would be made in accordance with all the widely accepted principles of accounting. A private institution acting independently from the government was authorized to control the prosecution and application of these accounting standards so that the government lost its opportunity to make explanations on behalf of itself. New Zealand broke taboos by granting the financial reporting authority of the government to an independent institution through this application [ 38 ].
After shifting to the new financial management system, it was possible to see integrated financial reports of the government in New Zealand. Collecting information from departments, government institutions, and state economic enterprises. Studies for improving government finance management were carried out in three directions as creating government accounts, preparing accrual reports, and reporting which includes other independent institutions and enterprises of the government.
Accounts and contents were determined through these adjustments. In fact, it was required to be in conformity with generally accepted accounting practice GAAP in New Zealand for the accounts which were applied in the central and local administration. Basic element of GAAP is accrual basis in accounting [ 20 ].
Adoption of widely accepted accounting standards facilitated the establishment of accounting policies in New Zealand. Approaches which are used by private sector in many areas could easily be applied. Since accounting policies of the government suggested a methodology for preparing financial statements and affected all the government institutions, development of accounting policies was highly emphasized. These accounting policies were also analyzed by the accounting specialists in detail [ 41 ]. Developments in the field of government accounting were maintained within the scope of government management reforms in Australia, just like in New Zealand [ 20 ].
Governments made progress in accrual accounting especially after , and they brought a vision to accrual accounting in the issues of financial reporting, management systems, government reporting, and budgeting. However, government managers were warned against the issue of accrual basis accounting starting from the mids indeed.
In the s, Australian Accounting Research Foundation, Australian Accounting Standards Board, and Public Sector Accounting Standards Board developed the idea of general-purpose financial accounts both for private and government sectors [ 27 ]. Large-scaled financial and administrative reforms in Australia include two basic themes [ 42 ]:. Focusing on management control system by developing information obtained from accounting system and defining and determining roles and responsibilities. Providing economic balance by bringing the concept of competition in the government sector.
In general, financial reforms include financial reporting, accrual basis accounting, complete cost, reconciliation between supplier and buyer, and management of the assets, while administrative reforms include structural reforms, operational reforms, revision of information systems, and other reforms regarding responsibilities. However, administrative reforms are not limited to the foregoings . Government institutions started to apply accrual basis budget and accounting as a result of these reforms.
Accrual basis accounting system was applied, and accrual basis financial statements were created in Australia for — budget year for the first time [ 42 ]. Enterprise accounts, asset and liability accounts, cash flow accounts, and bond accounts were included in the account plan which covers the whole central administration [ 20 ].
The Government of Canada has applied cash basis in budgeting and recognition of financial transactions until the s. So that cash basis accounting was used as an instrument of showing false financial reality. However, evaluating financial assets as differently from the reality did not satisfy the need for information which would help correct estimations for the future.
So the Government of Canada was highly indebted through its financial statements and budgets obtained through cash basis accounting, could not see the real financial status, and could not take the necessary precautions. The Government of Canada gave up using cash basis accounting application and decided to shift to accrual basis accounting application in order to remove this negativeness. The Government of Canada made important changes in financial reporting applications and shifted from cash basis to accrual basis and financial statements consolidated from separate accounting reports from the beginning to the end of the s.
There are reform studies regarding the functions, operations, and structure of central administrations in England. The most important reform in this scope is that some authorities and duties of central administration units which provide government services have been transferred to autonomous institutions and agencies [ 44 ]. RAB is a term used for the application of accrual basis in government budgeting and accounting system.
Although benefits of accrual basis accounting for the countries could not be understood by many countries in the s, it was understood in England that accrual basis was efficient in both budget and accounting. Accrual basis accounting system was used primarily for government health services at the beginning of the s [ 45 ]. England pays much attention to record budgeting and accounting in accrual basis. RAB transforms political priorities of the government into department strategies and budgets, so that the parliament can be reported about productivity and efficiency of the services.
It fundamentally aims at enriching the services which are provided by the government. There was also an important progress regarding the announcement of RAB after July 11, [ 46 ]:. On July 19—20, , two parliamentary election committees Government Accounting Committee and Cooperation Committee authorized the Parliament to make the Treasury apply accrual basis accounting for — fiscal year. There are financial statements in England, which is similar to the ones produced by government institutions and private sector institutions.
However, budgeting process is still regarded as one of the fundamental aspects of financial control. Developments in government accounting in the USA started with the government sector reforms. The Federal Government prepared a large program for the development of management as from It was specifically emphasized to facilitate government management and decrease the costs, increase the efficiency of service programs in government sector, and develop financial system to the extent that it can be compared to private sector. In , Federal Accounting Standards Board was founded in order to strengthen the relationship between reporting and accounting upon the agreement of budget office, treasury, and general accounting office.
This board has a mission to make advices in accounting standards [ 20 ]. This board would be making contributions to development and the use of accrual basis accounting in the next years. As a result of the studies, Administrative Financial Accounting applications made it possible to analyze and report the way of using and controlling the sources as well as collection and measurement of the information which is produced [ 30 ].
This act aims at establishing a system of strategic planning and performance measurement within the Federal Government and emphasizes preventing waste and enabling efficiency in the use of government sources in order to fulfill the common needs and demands of the citizens sufficiently. Within this scope, it includes strategic plan, performance plans, and performance reports which are the documents that will be used for getting objective information regarding determination and achievement of performance measurement, aims, and targets; meanwhile procedures and principles regarding the elements which are needed to be available in these documents as well as qualifications and preparation of the documents are also indicated [ 47 ].
EU member states, except for Germany and Denmark, prepare their financial reports in accrual basis. Moreover, many member states do not prepare their consolidated financial statements for the whole of government. There are different applications in studies of the countries to shift to accrual basis. Firstly, Holland and Sweden prepared their financial statements in accrual basis and then reflected these statements in their budgets. On the other hand, France and Spain apply accrual basis only in their financial statements while adjusting their budgets in cash basis.
Prepared by government management committee, OECD Study put forward that only three member states prepared their government financial statements based on accrual accounting. Statements prepared in corporation level suggest that there are three member states more in this group. So only 6 member states among 15 member states use accrual basis though in different levels [ 48 ].
Spain has been using cash basis accounting system and unilateral record method with regard to government accounting since First studies regarding the government chart of accounts were published in and remained in force until January 1, when the new PGCP was put into effect. This system includes the following: chart of accounts for the general government, detailed accounting lists, and financial statement models regarding the rules of determination and valuation of prices.
So Spain shifted to accrual basis accounting with regard to government accounting and adjusted the principles of accounting for the government institutions in a way that they would not be different from the principles of accounting for private sector [ 49 ]. The most outstanding characteristic of Sweden government model is that decisions made by the government are jointly made by all the ministers. While daily activities are carried out by a large number of independent units and authorities in different scales, structures, and types, the cabinet determines and makes the policies.
Upon the approval of government budget by the parliament, all the allocations are submitted to the use of the government, while the government transfers its responsibilities and funds to its bodies. All accounting applications are carried out in the level of independent units in this sense, ministries are regarded as independent units.
However, some exceptions from accrual basis accounting which are specified in the regulation were applied for a majority of the independent units, while old methods and standards were allowed to be used. Regulation was changed in , and all the exceptions were abolished in when one-third of independent units changed their accounting methods every year. The parliament also decided to apply these accounting regulation adjustments and accounting principles for the whole government sector. These principles were also standardized in local and regional institutions, but there was no obligation imposed.
So that it became possible for Sweden to execute annual accounts in the basis of operational balance sheet, certificate of revenues-expenses, and universal accounting principles which include application balance sheet for sources and funds [ 50 ]. Shifting to accrual basis accounting system was regarded as a fundamental step for the managers to derive benefit from total flexibility in input selections.
So it was required to see the costs of each input in order to have a more efficient management. Accrual basis accounting system increases the quality of cost information. Also budget and all allocation accounts are also cash basis. Moreover, Sweden brought the obligation of publishing annual reports for the government institutions in These annual reports include not only financial reports but also performance reports [ 51 ]. The government aims at getting the best cost and benefit by using accrual accounting and budgeting in all government services.
Traditional view suggests that receivables, payables, and assets of the government should be excluded from the scope of government accounting because of the reasons below [ 12 ]: There is no power of disposition on the assets of the government purchasing, renting, etc. With Recourse Able to collect losses on uncollectible accounts from the seller. You may also like. Therefore, it is easier to understand, apply, and manage compared to accrual basis accounting system because such transactions of determination of tangible assets, amortization, and reevaluation are excluded from accounting. Providing economic balance by bringing the concept of competition in the government sector.
Having been used in private sector until , accrual accounting also became important in budget classification with the help of these studies after the discussions of full accrual or half accrual [ 52 ]. This section firstly explains the historical development of government accounting applications regarding the application process of government accounting in Turkey.
Then, it will address to the reform of government accounting applications in Turkey. Government accounting applications in Turkey date back to pubic accounting system in Ottoman Period. In the fifteenth century, Ottoman Empire firstly made financial legal regulations and then aimed at developing accounting regulations within this legal framework. So a strong government accounting order and organization emerged in the mid-fifteenth century when financial management was structured within the government organization. Government accounting was regarded as a place to hide the secrets for Ottoman Empire.
It also emphasizes the importance of government accounting. In the mid-seventeenth century, when there were no budget applications in the west; the idea of government budgets was brought in Ottoman Empire. Budget expenditures were higher than budget revenues at that period. This deficit became chronic as the wars were longer and more expensive.
When Europe became richer and stronger in the seventeenth and eighteenth centuries, Ottoman Empire fell behind in economic and military terms. Being a part of the reforms, Imperial Edict of Reorganization in Ottoman Empire was announced in This edict brought reforms in the field of law, and then the most important reforms were made in the field of finance.
Works of writing the legislation of expenses which started toward the end of Period of Reorganization continued until Constitutionalist Period and ended in this period. Subsistence, salary, and retirement laws were put into force in this period by completing the legislation of expenses and starting to keep the records of government officers working in provinces and at the headquarters.
These legislations of expenses created the basis of current legislations of expenses in Turkey. After Constitution was put in legal basis again and Second Constitutionalist Period was announced, the First Parliament and Assembly of Notables accepted the budget of that year in This budget is of high importance to create the basis of the budgets in the other years in Republic Period. This main law was practiced until abolished in through the Law No. The first difference in government accounting applications in Turkey is composed of government accounting and budget system in Ottoman Period, while the second difference is composed of government accounting which is applied by the regulations in the field of government accounting throughout Regovernmentan Period.
There are important differences in terms of state organization and legality of regulations between Ottoman and Regovernmentan Periods. From this point of view, it is more appropriate to analyze the development process of current government accounting applications in Turkey within the scope of Regovernmentan Period. After the announcement of Regovernment, there has been important progress in development of government accounting and commercial accounting in our country.
While there were progresses in commercial accounting depending on the share of the statist economic policies and so the government in the production of goods and services, there were also important studies in the field of government accounting. As a result of these studies and efforts, General Accounting Law No. This law includes authorities and duties of accrual departments, government officers, and accountants of the ministries as well as government budget and other relevant issues [ 54 ]. Law No. However, as a natural result of changes in government management concept and government organization structure, Law No.
Financial system which is composed of this fundamental structure is as follows [ 55 ]:. The total assets always equal the total combined liabilities and equity in dollar amount. The statement can be used to help show the status of a company. Accounting standards often set out a general format that companies are expected to follow when presenting their balance sheets. International Financial Reporting Standards normally require that companies report current assets and liabilities separately from non-current amounts. Current assets are the most liquid assets of a firm, which can be realized in 12 months period.
Current assets include:. Non-current assets include fixed or long-term assets and intangible assets :. Owner's equity , sometimes referred to as net assets, is represented differently depending on the type of business ownership. Business ownership can be in the form of a sole proprietorship , partnership , or a corporation. For a corporation, the owner's equity portion usually shows common stock , and retained earnings earnings kept in the company. Retained earnings come from the retained earnings statement, prepared prior to the balance sheet.
This statement is additional to the three main statements described above. It shows how the distribution of income and transfer of dividends affects the wealth of shareholders in the company. The concept of retained earnings means profits of previous years that are accumulated till current period. Basic proforma for this statement is as follows:. The unit of measure in accounting shall be the base money unit of the most relevant currency. This principle also assumes the unit of measure is stable; that is, changes in its general purchasing power are not considered sufficiently important to require adjustments to the basic financial statements.
Historical Cost Accounting, i. Financial accountants produce financial statements based on the accounting standards in a given jurisdiction. The trial balance , which is usually prepared using the double-entry accounting system , forms the basis for preparing the financial statements. Financial statements display the income and expenditure for the company and a summary of the assets, liabilities, and shareholders' or owners' equity of the company on the date to which the accounts were prepared. Assets and expenses have normal debit balances, i.
Liabilities, revenues, and capital have normal credit balances, i. When the same thing is done to an account as its normal balance it increases; when the opposite is done, it will decrease. Much like signs in math: two positive numbers are added and two negative numbers are also added. It is only when there is one positive and one negative opposites that you will subtract.
From Wikipedia, the free encyclopedia. This article needs additional citations for verification. Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. Major types. Key concepts. Selected accounts. Accounting standards. Financial statements. Financial Internal Firms Report.
People and organizations. Accountants Accounting organizations Luca Pacioli. See also: Cost accounting. The Wharton School. Retrieved 13 July IFRS Foundation. Archived from the original PDF on 1 May Retrieved 28 April Making Sense of Accounting for Business.