Governments are non-profit organizations which require accounting strategies and reporting mechanisms that are different from those of businesses. It should be noted that there is complexity in accounting for this multifaceted levels of governments given its dynamic aspects in businesses being conducted and modes of revenue collection. Even administrative zones within the same category often engage in different businesses.
Governments are extensively diverse; this means that one set of principles is not comprehensive enough to cover all entities. This is made even harder by the fact that all the principles must agree and direct the government towards a particular envisioned goal. Internally, governments also have businesses, thus there is a conflict in the internal and external operations of the government, therefore the strategies and policies need to be delicately handled or there would be a total failure of the system. Sometimes the financial principles in a government may bring controversy such that it will be able to satisfy one entity and fail to satisfy the other this is made even more complex if different governments were to merge and make common policies.
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Upon making wrong policies and strategies, large cities are very likely to collapse. The common causes being credit blooms which are associated with poor lending standards to non-performing borrowers (Claessens, 3). A city may have general assets that exceed other government revenues yet still be in financial crisis. The main contribution of this could be that the assets owned are non-current assets which cannot be easily turned into cash and has a lifespan of more than one year. Most of these assets are usually fixed this means that limits are imposed on the use of the assets, hence they cannot be used in running important errands of the government.
In conclusion, there is need to develop an even accounting system that is all-round and dynamic at the same time to the needs of different governmental entities. The glaring fact in all this is that every successful breakthrough in economic development in the past century has been as a result of sound financial accounting and management systems. (Krugman, 10)
References
Claessens, S., Feijen, E., & Laeven, L. (2008). Political connections and preferential access to finance: The role of campaign contributions. Journal of financial economics , 88 (3), 554-580.
Krugman, P. R. (2008). International economics: Theory and policy, 8/E . Pearson Education India.
