Objectives of New Accounting System
Accounting is an effective tool for financial administration. It helps to achieve the goal of the financial administration. The Account Committee 2017, which recommended the new accounting system has the following objectives:
- To keep systematic record
Under new accounting system, all the financial transaction are recorded systematically & scientifically. All the transaction may be related to cash and store items. It helps to control the misuse of government fund. It also provides the financial information whenever required.
- To supply financial data & information
The historical financial data and information are helpful for estimating budget. The new accounting system provides various financial data & information for various purposes. It requires such data & information for preparation of financial statements.
- To provide information about funds
The government needs to be informed about the position of different public funds. It requires detailed information regarding sources and utilization of various government funds on administrative and developmental works and their position on a given point of time. Hence, the new accounting system supplies up-to-date information about such public funds.
- To safeguard the physical properties
The government offices use various physical properties to perform the regular and incidental jobs. New accounting system aims to maintain the systematic recording to such public properties. It uses various forms for their proper recording.
- To maintain effective control over budget
The government prepares a budget for making expenditures into different heads & subheads. According to the objective of the new accounting system, every government office should make expenditure within the budgetary limit. To fulfill this objective, every operating level government office should prepare budget sheet under AGF No. 8.
- To make audit easier
Many accounting forms are used by new accounting system to record the revenue and expenditures. Such forms are designed and prescribed by the office of auditor general. Under this system, auditing is compulsory in all government offices. Data & information provided by new accounting system helps to make an audit easier and simpler.
- To provide financial information for periodical reporting
Government offices need to prepare various types of financial statements and reports at the end of every month as well as at the end of the fiscal year. The new accounting system provides necessary financial data and information for the preparation of different types of financial statements and reports.
- To provide reliable financial information for planning and decision-making
The government has to prepare different plans and policies. It has to make important financial decisions. The new accounting system provides reliable financial data and information for making plans, policies, and decisions.
Importance of New Accounting System
Accounting is an important and effective tool for financial administration. The new accounting system facilitates the government for formulating plans and policies as well as for making financial decisions by supplying reliable financial information. The new accounting system is important due to following reasons:
- It keeps a proper record of the financial transactions and provides financial data and information to the government at the time of necessity.
- It makes expenditures within the limitation of budget, which helps to control unnecessary expenses.
- It helps in checking irregularities in collecting revenue and making budget expenditures.
- It provides reliable and up to date financial data and information for preparing and submitting various financial statements and reports.
- It facilitates for effective auditing of government funds.
- It provides necessary financial data and information to the government for the purpose of preparing an annual budget.
- It facilitates for effective use of aid and loan amount provided by foreign donors and agencies.
- It helps to make the financial administration of government effective by providing reliable and relevant financial data and information.
Limitations of New Accounting System
A new accounting system is an effective tool for making record and analysis of government funds. However, it is not free from limitations. The following are the main limitations of the new accounting system:
- It is mostly based on the cash system. No record is made relating to accrual transactions and hence, it cannot show the real financial situation of the government.
- It cannot provide necessary financial information for making proper decisions relating to the cost production, labor, and efficiency.
- It lacks providing a proper mechanism to check the frauds and errors committed in the books of accounts.
- The amount of advance is treated as actual expenditures and charged to the concerned budget heads at the time of giving the advance. Such a practice violates the basic accounts and principles.
- The entry for advance transactions requires triple posting in the bank cash book which is against the principle of the double-entry book-keeping system.
- There is no provision of the systematic store control system due to which there are great chances of misappropriation of goods.
- The forms used for reporting the government transactions under the new accounting system are not sufficient and cannot fulfill all the requirements of the financial administration.