The Study On Reform Of China’s Governmental Accounting

The reform of governmental accounting is not only a fundamental task in the field of fiscal management but also an important part in the construction of public finance. This paper thoroughly discusses the effects of the environment inside and outside China’s government organizations on governmental accounting, analyzes the defects of current governmental budgetary accounting, proposes the idea of reforming the current government budgetary accounting and building China’s governmental accounting that adapts to the new environment and offers detailed proposals on such reform.Determining the direction of running of the accounting system, the objectives of accounting are the results that people expect the accounting system to achieve. In the current society, the government and market are both methods of resource allocation. The purpose of the allocation of government resources is to perform government functions, i.e., provide public goods and services to the society to meet the needs of the public. Relative to the public needs, the government resources are limited. So the key to improve the performing of government functions is to promote the efficiency of allocation of government resources.On the one hand, the governmental accounting provides the information on the flow, allocation of resources of government function performing for the government decisions on providing public goods and services to improve the efficiency of government function performing. So this paper takes the optimization of resource allocation and improvement of efficiency of government function performing as the ultimate goals of governmental accounting. And in this orientation, this paper carries out theoretical study on China’s governmental accounting reform.On the other hand, the principal-agent relationship exists widely between the public and government and within government. According to the rational person hypothesis, with the advantages of full information, the trustee may be of moral hazard and adverse selection and harm the interest of the trustor for maximizing his interests. So it is difficult for the automatic achieving of the ultimate goals of governmental accounting. As the trustor, the public has the right to know the performing of fiduciary responsibility of the government, so the government-has the responsibility of external reporting. The trustor needs the information provided by the external reports of the trustee to carry out performance appraisal, know and supervise the performing of government functions. Under the relevant mechanism of external supervision, the internal trustee uses the relative information provided by governmental accounting to carry out performance management to realize the responsibility for the trustor and reflect and discharge such fiducial responsibility through external reports. So this study takes the reporting of information on the performing of government functions, meeting of the needs of external information users, and discharging of fiducial responsibility of the government as the fundamental goals of governmental accounting. On such basis, this paper carries out the study on China’s governmental accounting reform.The fundamental goals and ultimate goals of governmental accounting are inseparably interconnected. The achieving of government accounting system firstly depends on the reflection and supervision of external reports of governmental accounting system and finally depends on the information support of internal performance management. So the "reporting goal" of China’s governmental accounting is the basis, and the "management (control) goal" is the method of achieving of the ultimate goal s of governmental accounting. In the meantime, the "reporting goal" is the external cause, while the "management (control) goal" is the internal cause. The external cause must have effect through the internal cause. But due to the existence of the principal-agent relationship, the needs of the trustor, i.e., the "reporting goal", as the external factor of the governmental accounting reform, plays the fundamental and key role in the achieving of the ultimate goal of governmental accounting.With the dual orientation of reporting goal and management (control) goal, the quality of information provided by the governmental accounting information system lays restraint on how big the role that the external reports and internal performance management plays, and eventually affects the achieving of the ultimate goals of governmental accounting. The reliable, relevant, transparent and complete financial information is the basis for the achieving of governmental accounting goals. So the effective governmental accounting system is the basis for the government’s external supervision and internal management (control).The aim of the governmental accounting is to provide the financial information that meets the quality needs. The issues of the reporting entity, object and factors, and basis of governmental accounting must be clarified. First, the space scope of reporting needs to be determined. There are two methods to determine scope of reporting, one is the entity theory in the equity theory, which defines the organization as the reporting entity. It is good for the internal management and control and improving of the reporting effectiveness. Another is the fund theory in the equity theory, which takes the funds with special use in the organization as the fund entity for separate reporting. It is good for reflecting the special fiducial responsibility. This paper takes the improvement of governmental resource allocation efficiency and promoting of government performance as the ultimate goals of governmental accounting. The taking of organization as the reporting entity can better reflect the government goals. In the meantime, the funds with highly special use shall be reported separately to promote the regulation compliance of the governmental behavior. So this paper proposes that China’s governmental accounting shall have dual entity, i.e. the government organizations and the funds with highly special use within government organizations.During the process of performing of governmental functions, the relevant economic resources are consumed. Since the accounting mainly provides financial information, the reporting objects of governmental accounting shall cover the flow and results of all economic resources that can be measured in monetary terms. In the meantime, the governmental accounting elements shall be divided according to the relationship between the responsibilities borne by the government and the flow of economic resources in the process of performing of governmental functions, and the information needs of performance apprisal of internal and external information users. The governmental performance includes the regulation compliance of behavior and efficiency of results, among which the former is the basis. The monetary revenue and expenditure elements and accrual basis income and expense elements shall be set up at the same time to meet two different information needs and achieve the improvement of China’s governmental accounting basis. In the monetary revenue and expenditure items, the budgetary revenue, the revenue not covered in revenue and other revenue and relevant expenditure shall be set up to cover the information on the execution of budgetary revenue and expenditure in governmental accounting. The governmental accounting system shall provide not only the accrual basis (or revised) financial accounting information to reflect the consumption during the process of performing of government functions but also the information of budget execution to reflect the actual revenue and expenditure of the government. In the meantime, this paper draws a conclusion according to the relationship between recognition period of governmental accounting elements and accounting basis and performance-oreiented governmental accounting information need analysis. The recognition of governmental accounting elements shall have dual basis to provide different information, the application of accrual basis shall be gradually reformed with the consideration of China’s actual conditions to cover more resources and liabilities in the system of governmental accounting.The external reports play a crucial role in the achieving of the ultimate goals of governmental accounting. From the perspective of the rights of public as the trustor and the responsibilities of the government in accounting disclosure, this paper theoretically defines that the disclosure entity of governmental accounting shall be governments at different levels and the departments that perform detailed functions, and all information on the regulation compliance of governmental function performing and efficiency shall be disclosed. Through the analysis of China’s status quo of indirect democracy system, this paper offers the proposal of the adoption of the compulsory system governmental financial reporting, and the audit and assurance system of governmental financial reports to improve the information quality and understandability of governmental external reports. Finally, this paper designs the report system and contents of China’s different governmental reporting entities according to the information needs of performance review of information users. This paper suggests that China’s external reporting system of government shall be reformed gradually from bottom to top and from departments to government according to the urgency and difficulty of execution.