An Assessment Of The Accounting System In Private And Public Sector Establishment


Accounting can be defined as the process or art recording business transaction in a systematic manner. Accounting has been defined as the process of identifying measuring and communicating economic information  to permit informed judgement and decision by user of the information.

This definition  by the American accounting  association  appeared to dwell more on  investment  decision s made based on accounting information.  Investment  decision whether by investor  buying  shares in a company or a company investing   the funds at its my disposal involve identifying investment opportunities assessing or analyzing  the  alternative based on  sound economic principals.

Egbuonu  defined accounting as the recording  and analysis of economic transaction  in  monetary  terms and  fore casting of future activities  as part of management  information  system thus highlighting the use of accounting in planning.

The American institute of certified public  account (1959)  defined account as an art of recording classifying and summarizing  in a significant manner and in terms of money transaction an event which in part at least a financial character and  interpreting the result  of a financial character and interpreting the result of a financial  character and interpreting the result  thereof.

I would like to extend this of recording classifying  and summarizing analyzing, interpreting and reporting  on the financial  transition  and position of an organization to  interested person.  The  process of recording  classifying and summarizing can be done  thus.

Ugwu development committee

S/n Donor Cash Cheque Pledge Total
1 Chief Akalue ome 30,000 30000
2 Chief

F chiokomo

70,000 70000
3 Mrs. Mmanwanyi 120000 120000
4 Madam cash 70000 70000
5 Lady ibiam 30000 30000
100-000 100000 120000 320000


In this illustration during a launching a total amount of 320,000 was launched, out of which N 180,000 was  realized as cash N 100,000 realized by cheque and N120,000 by  pledge.

Stephen A  Igbowe 2002 defined accounting  as the  art of collecting recording  summarizing analyzing  and reporting  in  monetary tem information. It may be further defined as a measurement and communication system which provide economic  and social  information about a business organization which will permit users to make informed judgement and decision  leaching  to an optimum allocation of resource and the accomplishment of the organization objectives.

B.c Osisoma (!990) defined accounting as the mode in which business information  is identified processed and transmitted and received by the relevant parties in business. Both definition recognized of business data are important  part  of accounting.  However, AKPA’s emphasis on interpretation makes it clear that accounting goes beyond the mere  collecting and organizing of data  and information.  To be  more than a  book keeper a person preparing accounting  report must be able  to  understand  the operation of the business environment as well as organize the selected information  useful to others.

Afterward the definitions of accounting  focused on the purpose of ac counting process.  AKPA (!970) stated that accounting  is a  service  activity  whose function  is to  provide quantitative information  primary, finical  in nature about  economic  entities that  is  unintended to be useful in  economic decision in making  reasoned choices among alternative and event that are significant  in making economic decision and portray this information in every thing  that aids user decision.

An accounting system is a set of method plans and procedure used to identify analyzed  measure     record, summarize and communicate relevant economic information to interested  parties

The activity of analyzing  interpreting and reporting are higher order duties of an accountants. Preparing a repot or statement for interested users of accounting information is very  important in accounting the users include investors and  shareholders management employee and union   leader customer and  suppliers, the press and the general public as well as government agencies, each user require sometime , particular statement or report  for it  sole use only. Accounting involve  generating information to meet  such requirement

The analysis  and interpretation of financial  result  of business entities is  very useful to all the users of accounting  information if  the employees, customers share holders, of failed banks wearable  to see the  backwardness of the  banks  through the financial  statement, they would  have make hay while the sun shin.

Again, the skill of analyzing  and interpreting result require  accountants.

Adegite defined accounting as the4 process that  deals with measurement and concerns the collection clarification and  presentation of  information  on economic  activity in form of event on economic  activity  in form  of event and transaction  converting  this into monetary  terms for display and communication  in an appropriate from  to  internal  and external  user groups for the decision making planing

For accounting to meet the current  challenges of business and government It has to be with a lot of analysis and interoperation of  financial  transactions, events and position. Analysis  is done by using  scientific  and mathematical tools and statistic linear programming and  financial  mathematics and other quantitative  techniques. Business activities make  decision on sources of financial to  utilize, investment  into  which  to employ available  funds, and  how  to  distribute  the rewards or result of their operation for a period.

Read More: Public Sector Accounting in Nigeria

Accounting  aids  management to ensure that these decision  are economic efficient  . As a result accounting to  involve the use of scientific  tools  to communication   to management  in a financial language that can result in  decision being made that will produce  the require result  public sector is defined as that sector of the economy established and  operated by the government in, its agencies distinguishable from the private sector and organized on behalf of the whole citizens  public sector accounting therefore is defined as a system of analyzing that financial  transaction of the government  into heads and subheads, recording  of  the financial transition in the cash  but and note book, classifying the financial statement of the government.

Uchenna Wilson Ani 2001 defined public sector accounting as the composite activity of collecting , analyzing, summarizing, reporting  and  interesting the financial transaction of government units.,

In the above  definition, the following  terms are significant and has to be explaining for comprehension purposes.


This is the recording of financial transaction extent and situation  suffecting the unit.


This is a term that is concerned with the procedure of separating  transaction into parts.


This involve classifying the categories of revenue  and expenditure into accounts recording to predetermined classification  code.


This involve the gathering of transaction  data is sun total and total in accordance with relevant  reporting units of the same classifications.


This is the transferring of the out come of the operation on the financial data  of the government to intend and interested users.


Interpreting means the explanation of the report on the activities and performance of the government.



The practice of accounting evolved since organized life evolved. The history of accepting can be traced from the early stage of life. There early man lived in caves from where he developed into living in comminutes later there are

The concept of specialization,. That is each person went about doing those activities of life for which he was most gifted. This gave rise to individual producing certain goods in quantities in excess of what they needed while there were other goods which they needed but they did not produce themselves. The result was exchange the first system of exchange was by barter. Later money  evolved and replaced barter.

During the stage off barter, resorting were done but only the quantitative of  good  exchanged were recorded. However as soon as money evolved all recordings were done in monetary terms.

Another perspective worthy of note about the history of accounting is the impact of the different stages of organized business on accounting. At the stage of community lives and specialization people serialized in using their skills in crafts and developed the guild system. Here the job was done by one man at most with the aid of members of his family. The guild system grew and outsiders were employed to work for the owner. The industrial revolution expanded the output and gave rise to the factory system of work. As the size of system of work. As the size of these factories grew it became impossible for  on person to set up  a factory alone.

This gave rise to partnership and of  course the joint stock companies. The joint stock act of 1844 gave rise  to auditing as an  aspect of accounting. The essential feature of limited  liability companies is that ownership is separate from management  large numbers of owners across the globe invest in companie4s while a few directors are elected to manage these companies. Also the size of these companies and the staff competition for funds, markets  new techniques like cost and management accounting to aid management in decision making.

Taxation is another branch of accounting required to aid management is decision making. Tax has a lot of implication for management decision on the hand is an impotent source of revenue on the other.

in the public sector, government accounting can be traced back to the native renue profanation N2 of 19006 which was the first step taken in the British colonial government to introduce a comprehensive legislation and direct taxation in the  colony.

He applied only to worthern  Nigeria and empowered the resident of each province with the approval of government to fix and assess the fribute  payable by the people by the  people. These taxes were accession duty, homage to elders and cattle tax.

The 1914 amalgamation gave Nigeria one consolidated revenue. There after the government regularly faced the problem of how best to use  this  revenue for the benefit  of the  people  all over the country. The amalgamation  gave Nigeria  common railway telegraphs, customs and excises, a supreme  court, a standard time, a common currency and common civil service. In  preparation for the introduction of direct taxation in  the south partly to  provide government with more revenue and  partly to provide fund for the native administration, the 1906 proclamation was enacted with    modification as Nigeria  ordinance tattled native  Revenue 1997.  Public revenue rose  from 100,000 in 1906 to 2,668,000 in 1913 as a result of increased direct taxes and more  custom duties. It  was not until  1st April 1957  that the Audit ordinance No 38, 1956 came into force to provide for the appointment, salary tenure of office and duties and power of the director of federal audit and for the audit of public account for the federation and for other purpose, incidental there for and connected there with.

However, in the history of accounting the two important system of accounting include  charge and discharge system. The double entry system. The charge system is made up of the balance held at the beginning of a period to which is added any receipts from the owner or on behalf of the owner while the discharge is the outlays made to or an behalf of the owner. (fc okechukwu 1999)

Stephen A. Igbokwe 2002 stated that the double entry system was strongly influenced by the uneaten merchants. It was first published in ltaly in 1494 by a Franciscan monk named lucapaciolli. The paciolli era was closely followed by a steady development  of accounting. A Dutchman Simon stevin in 1605, advocated that the profit and loss accounts be prepared and annually.  In 1665, Jagues survey suggested that the balance sheet bedrawn up at certain stated intervals. Accounting professionals with  a role of professional accounting bodies. In 1854, a royal charter was granted a society of accountant. In Scotland in the years 1980, the institute of chartered accountants of England and Wales was found. In the U.S.A the association of public accountants was launched in 1887. Later the institute of chartered accountants of Nigeria was established and it belong to both the international federation of accountants.  From the fore going, it is obvious that  accounting has never been static  subject it has continued to develop to meet the demands of the complex change affecting  business. Today accounting  has come of come of age.


Two useful classification of accounting have been proposed. These are  operational and  equity accounting soderstion (1984) stated that the  operational accounting is concerned with use of  accounting information for decision making by managers and   investors relate to future goals and  expectation. It further explained that equity accounting  focus on the safeguarding and settlement of the economic rights and obligations of different groups of interest. It is used  to  establish social  organizational  and individual  equity and to support custodial functions he said that a manger uses equity accounting when performing custodian function and operational  accounting when for making resource allocation decision. The investors use operational accounting information such as dividend  for share  net income and price earning ration of decisions making.

Farell (1989) stated that the operational accounting consists of financial and management  accounting. Financial accounting is the process of recording business transactions in the books. Of account in such a way that operating analyzing classifying, summarizing, communicating and interpreting financial information about government  in detail, reflecting all the transaction involving the receipts transfer and  disposition  of government funds and property. The purpose are to  demonstrate the priority of transaction and their conformity with established rules to give evidence of account ability for the stewardship  of government  resource and to provide useful information for the good control and efficient management of government operation. This definition show also that government accounting is not the same thing as national accounting or national income accounting. The inter refers to the process of capturing aggregate economic data necessary to arrive at the total of the incomes of every individual in a country. The government accounting is used by all branches of government  and by those who receive government funds to over see the complicated business of providing  government services or to report to the government  service on to government  funding in compliance with all impose regulations.

Local and state government as federal establishment report the receipts and use of funds granted by the federal government based upon government accounting.

Summarily the purpose of accounting includes.

  1. Measurement of performance using proper accounting system, the profit and loss of an organization could be  determined with ease. The result will act as a basis of evaluating the performance of managers and employees by share holders.
  2. Planning fort future past business transaction and activities available in accounting records help management for easy planning for the future.
  3. Business language-p All information concerning the value of assets, amount due received from customer are recorded in accounting terms.
  4. Custodial stewardship function- Accounting provides information on the assets and liabilities of the business in monetary terms it helps to discover error frauds, manipulations by unscrupulous mangers.

The account operational guidelines consist of the basic assumption basic principle and constraints.  The basic assumptions, include

  1. The separate entity assumption- In this assumption the business entity activities are separate from the owners personal activities and  other business entities.
  2. The going concern assumption – Unless there is good evidence to the contrary, accounting assumes that the business will continue to operate for an idenfinitely long period in the future. The significance of this assumption can be indicated by contrasting it with a possible alternatives, namely, that the business is about to be sold or liquidated. Under the giving concern assumption, there is no need to measure at all times what the business is currently worth to a buyer. Instead a mechanism for adding value to the resources uses, and its success is measured by the difference between the value of its output and the cost of the resources used. In creating that output are shown on the accounting records not yet used in creating value to out ides but rather at thee original cost.
  3. The time period (periodicity) assumption which recognizes that timely financial reports must be made to those who need the information in these reports.
  4. Money measurement assumption- this is an assumption in which a record is made only of those facts that can be expressed in monetary term. The advantage of expressing facts in monetary terms is that money provides a common denominator by means of which heteroglios facts about a business can be expressed in them of number that can be added and subtracted. This concept however impose a sewer limitation on the scope of an accounting report. Therefore it holds that every credit entry must have a corresponding debit entry and vice versa.
  5. Accrual assumption- The assumption under accrual is that revenues and \codst are accrual that is to say that they are recognized as they are earned or incurred and recorded in the financial statement of the periods to which they relate.
  6. The Dual assumption- This assumption holds that every credit entry must have a corresponding debit entry and vice versa. The resources owned by the business is called assets. The claims of various parties against these assets are called liabilities. These are two types of liabilities. Accounting system are up in such a way that a record is made of two aspects of each event that offer these rewards, and in essence those aspects are changes in assets and changes in liabilities.
  7. The Realization Assumption – In this assumption revenue is considered as being earned on the date at which it is realized, that is on the date when goods or services are delivered to the customer in exchange for cash or some other valuable consideration. For service revenue is recognized in the period in which it is rendered for tangibles, revenue is recognized not when a sales order is received, not when contract is signed, not when the goods are manufactured, but rather when the product is shipped or delivered to the customer.
  8. The matching assumption – Under this assumption, one should be matched with the corresponding revenue and should be accounted for in the time period in which the revenue is recognized. The matching assumption may be ignored where company expensed out the entire support deferred revenue expenses in the year it is spent on the grounds of conservatism. Therefore, this assumption is where the revenue realized is matched with the expenses incurred in earning it.
  9. The Historical Cost Concept – This is an assumption that is concerned with cost incurred inorder to acquire fixed assets.

Finally, the primary constraints include cost benefit constraints and industry practices and secondary constraints and conservation.

  1. The consistency Assumption – This is the assumption that accounting policies are consistent from one period to another. The consistency assumption requires that once a company has decided on one of the methods of accounting principles, it will treat all subsequent event of the same nature in the same manner. Unless this assumption is applied, comparison of the figures reported in the financial statements of the company will past or subsequence periods or with another company will be unduly faulty. Here, the use of consistency is restricted to treatment of an item in a similar manner over a period of time and not logical consistency at a given moment of time.
  2. The Business Entity Assumption – Accounts are kept for business entities as distinct from the persons who subscribe to run there entities. When the owner takes cash out of his business, for example, the accounting record shows that the business has less effect of this event on the owner himself may have been immaterial, he has taken cash from his business cash till. Even though it remains his cash there must be a way of showing the difference.
  3. Conservation – The rule of conservatism is that profits are not anticipated while all losses are charged against revenue as soon as recognized. This rule should not be overstretched to the extent that its adherence will distort the final result in the long run.

However, the following are the concepts and principles or assumption of government accounting. Public sector accounting is an integral but separate branch of accounting sharing in common many concepts and principles applicable to the private sector.

  1. Government/Accounting entity-partnerships, corporate bodies, and corporate affiliations are typical examples of accounting entities. Governmental accounting systems should be organized and operated on a fund basis.

A fund is defined as a fiscal and accounting entity with a self-balancing set of accounts recording cash and other financial resources, together with all related liabilities and residual equities or balances, and changes therein, which are segregated for the purpose of carrying on specific regulations, restrictions or limitations.

This definition emphasizes the separate and distinct character of a fund. The number of funds which may be identified will depend, in part, upon the size and operational spectrum of government entity.

  1. Consistency Concept – This concept points that once a particular principle, rule or procedure is adopted in preparing and presenting government financial statements, it should be consistency applied. When a change becomes unavoidable the circumstances leading to this must be disclosed together with the financial effects of the change.
  2. Budgets – Since large amounts of money are usually involved the governmental unit prepares an operational budget and incorporates it directly into the financial report and into the system accounts were useful.
  3. Revenues – Additions to assets or decreases in liabilities always give rise to increase in the residual equality in a fund. This could be equated to inflows of working capital. District revenue element include property taxes or other taxes receivable, fees for permit, charge, fpr services rendered, and interest received. Revenue also compasses contribution from the general fund to the capital project to fund to cover a portion of a project.
  4. Expenditure – outflows or commitment for outflows of working capital of include those charges that relate to the cument fiscal period as well as capital outlays and provision for debt retirements.
  5. Encumbrance and obligations – A system of encumbrance is a means of restricting or reserving available spending authority pending the recording of actual liabilities and expenditures. The encumbrance system is used by most government fund, general funds, special revenue, capital projects and special assessment funds, to demonstrate compliance’s with legal r
  6. Requirements and to prevent over expenditure.



Farell (1986) stated that the tribute of accounting information refer to the quantities necessary to satisfy users need. Two essential quantities for general purpose of accounting reports supplied to external users are

  1. Relevance

He stressed that for accounting information to be useful, it must be relevant. Relevance of accounting information includes data on current assets and current liabilities and quanlitatives information about them. Accounting information must also be reliable. He said that reliability in accounting information signifies faithfulness constancy and trustworthiness. One way of ensuring reliability in accounting information is to ensure adherence to accounting principle.

An independent audit of accounting reports checks on the reliability of the information provided in these reports.

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