The Role of Accounting in National Development

The Role of Accounting in National Development

Accounting measures the profitability and viability of any project.  The definition of accounting has already explained the role of accounting which is the system of collecting, summarization, analysis and reporting of data of an organization or project in a form suitable and comprehensible to prospective users. 

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Development of project is something that entails projection into the future and this is where accounting plays the role of proper keeping of records or accounts of every element of a transaction and necessary statistics by employees of private and public sector so as to enable proper evaluation of past control records with what is presently obtained and then project reasonably into the future.  Accounting also, provides the measure of liquidity or cash flow and indicates when there is a decline in liquidity or short fall in cash flow.


The task and significance of account in government is assessed in terms of heavy financial involvement of government in the affairs of a country and every aspect that has accounting involved in the various activities of government depends on the understanding of the role which it can play in aiding government to execute its business.

In Nigeria and other developing nations where government has important ownership and control of concerns in virtually all sectors of the economy, the need for proper accounting manifest itself.  The accounting role in government is jointly performed by both accounting and non-accounting officers and government accounting report provides financial information to the following interest groups:

  • Government units: administration and its legislative body.
  • Investors: both local and foreign
  • Students: especially those of public finance
  • The general public.

Therefore, it is essential that these reports issued by government are genuine and as far as possible correct.


The idea of planning has been the motivation of nations that launch and commission development plan of which Nigeria is on the fourth and already articulating what should form fifth national development plan.

Planning could be defined as a system of activities directed towards the establishment of goals and objectives and discussing methods of attaining those goals and objectives based on the available and anticipated resources.

After, the world great depression, the developed countries recognized that government have great part to play in propelling the growth of the economy in the direction and government action are normally, based on activated planning.  This planning is of a macro nature and comes about as result of failure of micro-planning of the three market to solve the necessary economic and social problems through resources allocation.

The aims of planning therefore, reflect those human aspiration which market forecast failed to solve.  These includes attempts to achieve full employment of resources, stabilization of the price level at acceptable degrees in the economy, balance of payment equilibrium, increase in output of goods and services, income distribution etc.

Planning and forecasting helps in additional information on the likely future prices and those information only be gotten through accounting.

For the periods under review, and that the company complied with government regulation in the conduct of the business.  The decree therefore, makes it possible for adequate tax to be levied on companies registered in Nigeria.  There is also the Income Tax Management Act 1961, which governs the taxation of individual trustees, executors, partnership, communities etc.

It is important to note that taxation is not only a source of revenue to government performance.  Other roles like ensuring redistribution of income, providing incentives, through tax holiday grant, protecting infant industries from external competition tariff etc.


Project evaluation and economic planning was discussed in the previous sub-headings, and in government as well as in the business world accounting is an essential tool in fulfilling them.  Resources allocation is an essential function of the government and government yearly maps out in a statement its prospectus revenue and expenditure.

This is termed “annual budget”.  Accounting helps in the preparation of this annual budget because accountants always promote financial discipline by advising on equitable allocation of funds to various sectors of the economy.

Accountants are now involved in our foreign exchange reserve management by introducing the records and hence adequate planning.

The concept of planning and forecasting is very crucial to capital and annual budgets.  Since budgets are merely statement of projected revenue and expenditure over a specific period of time, planning and forecasting is very essential for a realistic budget.  Most times, yearly budgets are based on the total of a long term development plan and may initiate measures which may only start to produce results in years to come, example was the 1986, Nigeria Federal Government Budget.


Accounting is very important to the government in the following ways;

(i)      TAXATION:

It is one of the duties of government to produce basic governmental services to the populace from the money generated from her different sources to revenue such as taxation.  Individuals, companies are bound to pay their taxes annually, and accounting provides for an effective tax management.  The company decree of 1998 provides for all incorporated business organization in Nigeria to submit their yearly accounts, to the register of companies, form, which their tax abilities will be determined.  These accounts must be properly audited by firm of Chartered accountant confirm that it shows true and fair view of the financial position of the company ensure even distribution of income and increase the skill of the working population.  The attainment of national development is not always an easy for the developing nations and this is why all hands should be on deck (politicians, accountants, statisticians, etc) to achieve it.  In this term paper, the researcher is restricted to the roles which accountant plays in national development.


This ensures to a great extent that transactions are genuinely carried out and this makes for trust and reliability of accounting report.  Since we all know that accounting is the system of collecting, summarizing, analyzing and reporting of data of an organization or project in a form suitable and comprehensible to prospective users.  Accounting control within an economic system involves other related discipline such as budgeting control, taxation, cost accounting, auditing and quantitative techniques.

It also shows in details the role of accounting records in the development of a nation.  It helps in feasibilities studies, which helps to review the existing capital structure of the nation.  Its liquidity and cash flow positions and financial projections for a period of five years.  The capital structure of a nation and its industrial base is a prime consideration in feasibilities studies.

Their importance lies in the fact that any nation with a good industrial background requires a little assistance in accomplishing its project then those with inadequate industrial base (capital structure) and this is why such countries or nations are easily affected by the political maneuvers of other stronger countries and subsequently the general performance of the economic and the fate of various industries are determined from outside these countries.

The liquidity and cash flow position of any economic system is another essential consideration in project evaluation.  Cash is an essential factor in any business deal even though most recent day transactions are contacted on credit basis, the cash position or liquidity or credit worthiness of the benefiting enterprise or nation is properly checked out before negotiations are completed on such contracts.   This explains why Nigeria which has virtually unlimited access to numerous foreign loans during the oil boom era was recently denied such facility by International Monetary Fund (IMT) of which Nigeria is a member and other so called friendly nations except with certain foreign exchange budget.

Finally, accounting information is the guideline which government must follow in its’ activities, maintenance of balance budget, general growth of the economy and stable government with peaceful atmosphere.


Investment decision is where a private or public firm decides to put in capital into a project for the purpose of making profit.  Since future prices are unknown decisions based on the unknown are full of uncertainties and have the element of noble come in.  To minimize the risks of investments, additional information on the likely future prices are needed and this vital information can only be gotten through good accounting records.

Investments are necessary if we are to have a rapid and continuous growth of the country and since investment decisions are not based on current prices, the need to plan and have forecast prices becomes unavoidable.  It is to be noted that investment should not be in a half hazard manner of proper growth of the economy.  Development plans normally gives indications of the existing levels of investments in all sectors of the economy and from this the expected growth of each sector is made.  Each sector tries to use various policy instrument to direct the scarce resources to areas of most need in the economy and consequently achieving maximum output of each sector of the economy.

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