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Govt. Budget Failure: Cash Basis of Accounting

When we go through a Budget cycle, often omitted stage, Accounting, Auditing and Review stage seem abstract ideas and without any effect. That is the beauty of abstraction, those who know, know, rest will see towards the sky for everything. 

It is the established fact that States neglecting Accounting has been removed by time from the face of the earth. Those who care for Accounting always flourish. Can we conclude then, counting physical realities and posting them to paper (or computer memory) will make the country prosperous? 

The answer is yes and no at the same time. Corrupt countries practice accounting in paper and decision making is a mere joke, so the answer is no. But countries practicing accounting with physical reality and ensuring its credibility through auditing are those who are flourishing, so the answer is Yes. 

In present time, we can not just count and post them for accounting. The rise of private ownership, government too is becoming like owner of the total state properties. Hence, it is not sufficient for it to account only cash receipt and cash payment. Government too enter into contracts and these contracts make sure execution of economic events in future. These contracts are enforceable under law. It creates probable economic inflow and outflow which makes resources are committed for future in present time. Hence, cash basis of accounting can not enhance the role of Government as player of private ownership economy. 

Cash basis of accounting handicapped the government for decision making. Government can not have data for making long term decisions based on Balance Sheet (current financial positions of it) which is facilitated by Accrual basis of Accounting. On the other hand it can not provide basis for performance measurement. Once the year is over, nobody knows, what has been purchased, whether or not it need to be purchased, whether it is used, thrown, destroyed or whatever event may happen to economic resources. 

Hence, rather than investing in cash basis NPSAS, accrual basis accounting should be implemented. Else, Ashare development will continue for forever. 

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