Objectives, Importance and Limitations of New Accounting System

Objectives of New Accounting System

The Account Committee 2017, which recommended the new accounting system has the following objectives:

1. To keep systematic record

   

   
   Under new accounting system, all the financial transaction are recorded systematically & scientifically. All the transaction may be related to cash and store items. It helps to control the misuse of government fund. It also provides the financial information whenever required.
   
   
2. To supply financial data & information
   The historical financial data and information are helpful for estimating budget. The new accounting system provides various financial data & information for various purposes. It requires such data & information for preparation of financial statements.
   
   
3. To provide information about funds
   For proper utilization of, funds it is essential that authorities know about the status of various funds and their utilization . It provides necessary information about the position of funds, actual data of budget release under different budget headings.
   
   
4. To safeguard the physical properties
   The government offices use various physical properties to perform the regular and incidental jobs. New accounting system aims to maintain the systematic recording to such public properties. It uses various forms for their proper recording.
   
   
5. To maintain effective control over budget

   

   
   The government prepares a budget for making expenditures into different heads & subheads. According to the objective of the new accounting system, every government office should make expenditure within the budgetary limit. To fulfill this objective, every operating level government office should prepare budget sheet under AGF No. 8.
   
   
6. To make audit easier
   

   

   Many accounting forms are used by new accounting system to record the revenue and expenditures. Such forms are designed and prescribed by the office of auditor general. Under this system, auditing is compulsory in all government offices. Data & information provided by new accounting system helps to make an audit easier and simpler.
   
   
7. To provide financial information for periodical reporting
   At the end of every month as well as at the end of every fiscal year, the government offices need to prepare various types of financial statements and reports. So, the new accounting system provides necessary financial data and information for the preparation of different types of financial statements and reports.
   
   
8. To provide reliable financial information for planning and decision-making

   

   
   The government has to prepare different plans and policies. It has to make important financial decisions. The new accounting system provides reliable financial data and information for making plans, policies, and decisions.

Importance of New Accounting System

Accounting is an effective tool for financial administration. The new accounting system is important due to following reasons:

1. It keeps a proper record of financial transaction of government offices to prepared the records of government fund, investment, revenue, and expenses.
2. It provides all financial data, statistics and other information required for financial administration and control.
3. It provides proper guidance to the government for the preparation and implementations of an economic plan and policy of the nation.
4. It provides necessary information and financial data to the government for preparation of annual budget.
5. It controls the financial activities of the government because all the revenues and expenditures of government are recorded according to the financial rules and procedures.
6. It prevents the measure of government revenues and its properties because there is a provision of the audit of the books of account.
7. It provides certain guidelines for preparation of financial statements.
8. To ensure and effective uses of the aid and loan amount provided by foreign donors and agencies.

Limitations of New Accounting System

The following are the main limitations of the new accounting system:

1. There is no proper mechanism to check frauds and errors committed in the books of account.
2. It has given less emphasis on goods, properties and assets because it has given emphasis only on expenditures.
3. It is based on the cash basis of accounting but not made on an accruals basis.
4. There are higher chances of misappropriation of stock due to lack of systematic and proper store keeping system.
5. It cannot provide necessary information or data for making the decision on the cost of production and labor efficiency.
6. It does not follow the principle of double entry system in practice.
7. The forms are designed by the department of general do not fulfill the requirement of managerial need.