A Conceptual Study on Public Sector Accounting System: Benefits and Challenges

The accounting system of public sector differs from private firms. When the public sector is service oriented and give more focus on transparency in financial reporting, private firms are concerned more about profit maximisation and increasing value of firm. Public sector accounting is concerned with recording, analysing, classifying, summarising, communicating and interpreting financial information of government organisations. The present government accounting in India is cash based accounting. The public sector is reforming its accounting system as it is inevitable in providing a fair view of the public finance with full cost disclosure. Since we are bound to maintain credibility and transparency at the global level, it becomes necessary for the nation to adopt the international public sector accounting standards. India is moving towards accrual system of public sector accounting in a phased manner. Only few nations have adopted the International public sector accounting standards (IPSAS), whereas many others have adapted these standards. This paper attempts to study the traditional public sector accounting and benefits and challenges involved in the adoption of the international standards.