This paper intends to critically analyse the understanding of the legal and general background to public sector accounting and how public organisations demonstrate accountability. The main focus of this paper is to make a comparison between public sector accounting and private sector organisation accounting. The comparison is made between the laws, regulations and guidelines relating to private sector commercial organisations with public sector organisation. Further, role and purpose of accounting information in the public sector performance assessment process is discussed and evaluated. Moreover, role of auditor of public and private organisations is compared and contrasted. Accounting is the process of interpreting, recording, classifying, and summarizing measure in monetary terms regarding the economic activity that happens in an organization. The fundamental purpose of accounting is to provide information about an economic entity. This entity may be a company, a military unit, a hospital, a school, a farm, etc. It is the science dedicated to the collection, representation and measurement of accounting events. The role of accounting is to develop and communicate that information in a way that is helpful in planning and controlling the activities of the entity.
The method of accounting that is used in AVIVA Plc is IPSAS. International Public Sector Accounting Standards - the standards of accounting used in the UK and some other countries. IPSAS is is a combination of many IAS and IFRS. There were some elements missing in IAS and IFRS, thus IPSAS was adopted by the company in 2011. Before 2011, AVIVA was using the UK GAAP accounting standard and following the laid down policies by UK GAAP. IPSAS accounting treatment is regulated in detail certain practical situations. The financial year of the company represents the total of 52 weeks ending on 26th of February. The amendments, standards and the interpretation being adopted, follows the FRS interpretations. All these standards and amendments do not have any significant impact on the net assets of the company.
The main purpose of consolidated financial statements of the public sector at the sub national level in UK, as in other countries is to provide high-quality, transparent, objective and comparable information on the activities of the state authorities of the UK and local self-government. This information should be presented in the assessment that most adequately reflects the economic situation of the UK.
In accordance with the requirements of IPSAS consolidated financial statements of public sector should provide information not only about the financial position and financial performance of the state authorities of the UK Federation, local self-government and public institutions created by them (government sector), but similar information on commercial enterprises controlled by general government.
It allows the firm to perform a comparative analysis of the financial position of similar institutional units of public sector and other sectors of the economy. Further, analysis of the financial performance and financial management is conducted and comparative analysis of the public sector in various countries for comparable periods is made. This is done in order to assess creditworthiness and the quality of ...