Accrual accounting in China's public sector

Li, Siqiwen (2005) Accrual accounting in China's public sector. Masters (Coursework) thesis, The University of Birmingham.

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Abstract

Since 20th century 90's, most of OECD countries have introduced accrual basis into government accounting through series accounting reform. As the result, visible effect in strengthening government financial control and management in those countries has attracted the concern from other countries which have not involved in this trend. For Chinese government, cash basis has dominated in the area of government accounting for a long period. Chinese government accounting has very tight relationship with state-budget; and it behaves as foundation of entire financial and budget management, therefore, the accounting basis acts as the fundamental guarantee of sound financial and budget management system. For the comparable lower requirements on accounting information in the past, cash basis of government accounting could satisfy users' demands. But with the changes in government accounting environment, its inherent weaknesses make it quit the stage and give the way to accruals accounting----a new power in government accounting. From the start, accruals accounting has revealed its benefit on improving financial control and management in government. With it, government could has better performance on accountability, and provide more transparent report on its financial performance to information users including the investors. After some academic researches on its inherent characteristics and implementation experience, Chinese government has confirmed the implementation of accruals accounting as the key factor in the process of establishing effective modern government. For current Chinese government, accrual accounting have not been applied in all departments, Chinese government is experiencing the accounting reform which aims at changing the cash basis to accrual basis. Combined the successful reform experience from some OECD countries (like UK, U.S, New Zealand and Australia) with local environment, Chinese government accounting reform followed the step-by- step way with "Chinese characteristics" which begin from completing/creating reform environment to achieve full accruals accounting in final stage. Chinese government accounting reform definitely is a well planed arrangement. But the unpredictable changes will exist within the reform process. Certain timely adjustment is essential for Chinese government within reform process. Frankly speaking, there is no perfect accounting system in the world. For public financial management, even accruals accounting which has better performance in most fields than others, its inherent weaknesses would bring potential issues to government. And some issues have been existed in developed countries like UK, U.S. Australia and New Zealand. Chinese government has responsibility to pay more attention on those issues within reform process, and Chinese government need to do some analysis and prediction work on the problems which have high possibility to occur in future accruals accounting application. In China, completing the whole plan and apply accruals accounting in all levels of government would be long time process.

Item ID: 17731
Item Type: Thesis (Masters (Coursework))
Keywords: accruals accounting, cash accounting, government accounting, government accounting reform, financial management
Date Deposited: 17 Jan 2013 23:46
FoR Codes: 15 COMMERCE, MANAGEMENT, TOURISM AND SERVICES > 1501 Accounting, Auditing and Accountability > 150101 Accounting Theory and Standards @ 100%
SEO Codes: 90 COMMERCIAL SERVICES AND TOURISM > 9001 Financial Services > 900199 Financial Services not elsewhere classified @ 100%
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