Public Private Sector Management Accounting

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Public Private sector Management Accounting

Public Private sector Management Accounting

Executive Summary

The public sector retains a separate unique approach in most countries. Services are often provided free at the point of use and there is little or no direct link between the cost of these and government income, which is mainly in the form of taxation. Thus, public-sector accounting is significantly different from that found in the private sector.

In the private sector, the accounts are designed to report the level of profits achieved and retained. In the public sector, at least traditionally, the accounts compare actual payments and receipts with those which were planned in the government's originally agreed annual budget.

In recent years the major debate in public-sector accounting has been over the changes which some countries have made from the cash basis to the accruals basis of accounting. This has also included a debate over whether the private-sector conceptual framework is appropriate for the public sector.

In most countries, even those industrialised countries that are members of the Organisation for Economic Co-operation and Development (OECD), cash accounting has been retained in the public sector. Thus, public-sector accounting is relatively simple and as a result, there are proportionately fewer accountants in the public sector. At least 10% of ACCA members work in the public sector, but in many countries they hold the most senior positions, for example, accountant- general or auditor-general.

With the use of an instrument consisting of responses to eight vignettes, the authors of this study sampled ninety-two employees of a southern city's administration and 141 employees of a midwest financial firm regarding their predispositions to prefer deontological or consequentialist forms of ethical reasoning (or, more crudely, duties v. results). Contrary to theory, we found no difference between the public- and private-sector groups we studied. Furthermore, in contrast with the findings in earlier studies, we found that these respondents did not prefer consequentialist reasoning; in fact, both groups prefer deontological reasoning. Another hypothesis tested the relationship between (1) people's preferences for certain types of solutions to issues and (2) the forms of reasoning they use to arrive at those solutions. We found that preference for solution types was a stronger determinant of thinking for both groups than the type of rationale employed. This suggests that deontological and consequentialist categories do apply to behavior, but in ways different from what traditionally has been thought.


Comparisons between private (business) and public (government) sector effectiveness are commonly expressed in public forums, the media, by business and government leaders, and in day-to-day conversations. Such comparisons rely on assumptions that private and public organizations are so similar that the performance identified in one sector should be expected in the other. Usually it is the private sector that is deemed the more effective of the two. For example, the Clinton administration (Kurunmäki et al., 2003, 112-139) initiated the National Performance Review (NPR). Its purpose was to bring the quality of public service up to the same level as that of the private ...
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