PUBLIC ACCOUNTS

Dominion, Volume 14, Issue 123, 17 February 1921, Page 6

PUBLIC ACCOUNTS

DEPARTMENTS TO PREPARE (balance-sheets

NEW ORDER FROM THE - TREASURY

METHODS OF BOOK-KEEPING

State Departments are arranging at the present time to show their accounts in a sew form. They have been directed by the Minister of Finance, in accordance with a decision of Cabinet to prepare at the end of the current financial year, and annually thereafter, statements of receipts (and expenditure, profit, and loss, or income and expenditure accounts, and balance-sheets. Those statements, tho permanent heads of the Departments have been informed, are required for presentation to Parliament in the session following the close of each financial year. The Treasury has laid down the following principles for the guidance of the Departments in the preparation of the accounts: —

"To prepare an annual profit and lessor income and expenditure account and balance-sheet it will be necessary to have assets valued, liabilities ascertained, and both set out in a 'statement of affairs’ as the basis of entry on the .first day of the financial year. The' difference between the total of the assets and tho total cf the liabilities may be regarded as the capital of the Department for the purpose of preparing its first balancesheet.

“To produce an annual balance-sheet, the books must be kept on the doubleentry system, and capital and revenue items classified. ' Real accounts will require to be opened for each asset, and nominal accounts for tho purpose of recording under appropriate headings income and expenditure transactions. "A trading Account, profit and loss, account, or income and expenditure account should include all income accrued during the year, whether actually received or not, and all expenditure incurred during tho year, whether paid or not. A separate, set of accounts will be required for each undertaking or trading venture.”

The original circular on this subject was issued lato' in December, after nearly Jiine months of the current financial year had elapsed, and the task that has been set the Departments will not be easy of accomplishment as far as the year ending on March 31 next is concerned. The accountants of the various Departments cannot make retrospective changes in their methods of book-keep-ing, and it appears that in eomo of the Departments, at any rate, the accounts have not been kept in such a way as to make the information required by tho Treasury at all easily available. The valuation of assets, for example, is a new demand, involving much detailed work. Other difficulties arise from the fact that it is not the practice for the Departments to keep copies of vouchers. The vouchers are retained by the uryOne effect of the change in methods will be a demand for a workable method of assessing the services rendered by each Department to other Departments. Certain Departments can stand on their own feet as self-contained commercial ventures, but other Departments overlap and interlock to a great extent. The Dolieo tlepasitmcnt docs work for several other Departments, the Tourist Department incurs expenditure that benefits the Railway Department, and so forth. The preparation of profit and loss accounts .will necessitate allowance being made for services of the kind indicated.

Tho general principle of placing the public accounts on a business footing is approved inside as well as outside the Government .Departments. When the technical difficulties are overcome and the necessary adjustments made, the preparation of balance-sheets and of separate accounts fof each business undertaking or trading venture will throw new light on the operations of the De narhnents. The reform may assist the Government to effect economies by reducing the number of branches and*Departments in the service.