On The Improvement Of Government Accounting Recognition Basis In China

Cash Basis has been the main basis for accounting recognition in the financial management all over the world for a long time. Motivated by the New Public Management in 1970s, some developed countries like OECD members initiated a reform to introduce business management into the public governmental sections; and stress both the importance and necessity of financial achievement, accountability of the government and public departments, more transparent financial budget and more complete accounting information. Some of the developed countries represented by New Zealand and Australia have successfully practiced Accrual Basis as the government accounting recognition basis. Accepted by most nations, the Accrual Basis has been introduced in some developing countries to some extend for the successful practice.In the past 20 years of reforming and opening-up, Chinese market economy environment has fundamentally changed in government functions, public financial system, governmental achievement evaluative system, society supervision and the upcoming governmental income and expense classification, which require complete and transparent accounting information from the government. Thereby, Accrual Basis has to be gradually introduced into government accounting recognition basis instead of the existing accounting system. Recently this system has eventually been introduced in the reform of public financial budget management in Shanghai and the accounting checking method of Accrual Basis will be experimented in defrayment budget of major projects in 2006 with the correlative program on the way. Based on the successful experience of Accrual Basis practice in OECD members and an analysis of the major defects of the current government accounting recognition basis, the necessity of reform has been firstly put forward in this thesis. Secondly, feasibility and basic thoughts of introducing Accrual Basis into government accounting will be analyzed. Finally, a conclusion of the main contents of improvement after introducing the Accrual Basis in the fields of government accounting and financial report will be drawn.There are two innovative ideas in this thesis. Firstly, the feasibility of introducing the Accrual Basis is put forward by taking into account both Chinese specific situationand the successful practice in developed countries. Secondly, the basic thought to improve the government accounting gradually is analyzed by focusing on debt, balance, capital and financial report.