Specifics of Public Institution Accounting – Case Study of a Selected Faculty

Accounting solutions in public services have certain specifics that arise due to the specific position of public institutions. The state, in a certain sense, ** limits the autonomy of institutions in all areas**, and the field of accounting is no exception. For reporting the operations of public institutions, the accrual basis accounting policy is more appropriate, as it shows revenues, expenses and operating results according to the time when the business event occurred. However, the cash flow basis accounting policy tells us where the money comes from, where the money goes and what the risk is of whether the money will arrive.

Problem

Accounting solutions in public services have certain specifics that arise due to the specific position of public institutions. The state, in a certain sense, ** limits the autonomy of institutions in all areas**, and the field of accounting is no exception. In the diploma thesis, the following two specifics were presented: – dual accounting records and – division of public and commercial activities in public institutions.

Public institutions are established as non-profit organisations with the purpose of performing public services, and their objective is not to generate profit. For performing their activities, they are financed by the founder. The ** Public Institutions Act** also enables public institutions to carry out commercial activities when such activities are connected with the provision of public services.

The condition is separate recording of revenues and expenses for each activity. Monitoring revenues does not cause major difficulties, but monitoring and allocating expenses is a much more difficult task. Public institutions are obliged to maintain accounting records both on an accrual basis and on a cash flow basis, which often causes difficulties.

Results

For reporting the operations of public institutions, the accrual basis accounting policy is more appropriate, as it shows revenues, expenses and operating results according to the time when the business event occurred. However, the cash flow basis accounting policy tells us where the money comes from, where the money goes and what the risk is of whether the money will arrive. Therefore, for comprehensive management in a public institution, it is essential to prepare both a statement of revenues and expenses on an accrual basis and a statement of revenues and expenses on a cash flow basis.