Abstract
The main purpose of public sector accounting is to act as the trustee to protect and manage public moneys and discharge accountability. Fund Accounting is used as the rational response to serve as a reliable control technique for such purposes. With the emphasis of accrual accounting which is more reliable than cash accounting in measuring financial performance of government activities, this study therefore attempts to evaluate the relevance of the Fund Accounting in the planned adoption of accrual accounting by the Federal Government in Malaysia. Thus, the objective of this paper is to provide literature evidence to support on the relevance of Fund Accounting for the adoption of accrual basis of financial reporting in the Federal Government of Malaysia.
1. Introduction
Traditionally, input-based budgeting systems and cash-based accounting systems are used by government in United States of America (USA) for accounting and financial reporting with the purpose to protect and manage public money and discharge accountability. However, these traditional systems do not provide the accounting information that is necessary for a government to operate efficiently and effectively. There are a growing number of countries, such as Australia, New Zealand, and the United Kingdom that have already transformed from input based to outcome based budgeting system and from cash-based accounting to some form of accrual accounting system.
6. Conclusion
Malaysia’s New Economic Model (NEM) recommended the adoption of accrual accounting for prudent fiscal management and performance measures in the public sector. With the planned adoption of accrual accounting for Federal Government in Malaysia is in 2015, it is hoped that the findings of this study can help the AGD to evaluate the relevance of Fund Accounting concept for its transformation process towards accrual basis of government accounting and financial reporting. Accrual accounting can effectively complement outcome based budgeting in the results framework to provide the relevant cost data and information to make public policy decisions that maximizes the outcome of scarce resources.
