Public Sector Accounting has approaches and techniques applied in processing financial statements. They are Vote Accounting, Commitment Accounting, and Fund Accounting.


This is a form of accounting system for the Public Sector in which the financial records are based on budgetary estimates approved by Parliament. The vote or appropriation accounting system presents a report based on appropriation where funds are voted or appropriated by the legislature for various organisations. Under this system, records are kept for receipts and payments in accordance with the vote or appropriations approved by Parliament. Where a reporting entity spends less than has been voted for in the budget year, the balance is surrendered (i.e. paid back to chest). It is generally unlawful for the reporting entity to spend more than the amount appropriated unless there is an approved supplementary appropriation. But if the entity spends more than has been voted for in the budget, the estimate for the next period is generally reduced by the amount. However, if an expense item with a given line estimate is underspent; surplus can be transferred to supplement an overspent item within the same line estimate. The process of transferring funds within a line item is termed virement.  Some features of vote accounting include the following;

  • Receipts and payments are kept based on the amount appropriated by the legislature. All payments are often expensed in the same period. No systematic accounting principles are maintained for assets.
  • As a result of the above, depreciation is not generally applicable in vote accounting system.
  • Accounts are kept in receipts and payments format.

An appropriation bill covers the combined estimate of the spending organisations. This bill is passed into Appropriation Act after all the estimate has been examined and debated upon by the legislature. The functions of an appropriation act are to;

  • Authorized the estimate of the organisations;
  • Give approval to the ambit of the vote;
  • Become a reference point for resolving any misunderstandings and disagreements.
  • Denote by implication ultra-vires acts of any organisation.

The Parliament examination and debate of the estimates take some time before the final approval and subsequent passing of the Appropriation Acts to enable organisations to finance through government funds to get finances for their activities for any budget year. To ensure that the business of Government does not grind to a halt, appropriation in advance is often approved by the legislature pending the passing of the Appropriation Act, where it is clear that the Appropriation Act cannot be passed before the beginning of the following year.


This is the accounting technique that attempts to recognise and report expenses once an expenditure decision is made. In other words, as soon as a decision is made for the acquisition of a service or an item, cash is set aside to meet such cost and such committed expense is included in the reports. As soon as a commitment is made or an obligation is established or entered, relevant entries are made in the books of accounts.

Financial transactions are therefore recorded as soon as commitments are made. As a result, a transaction is not recognised upon the movement of cash but rather once the policy decision is made for the acquisition of the service.

A practical situation is when orders are made for some acquisitions. Once the purchase order is made, entries are expected to be made to reserve funds for the items. Though no legal obligation has arisen at this stage, hence no liability, an encumbrance entry is made, reserving the necessary amount of money to settle the order when delivery is made. When the order is met, the encumbrance entries are reserved and actual double entries made for the receipt of the goods or services, with payment made immediately or later subject to raising the necessary documentation.

A significant feature, which is an advantage, is that it enables budgetary control and efficient treasury management. With this approach, uncommitted budget funds are clearly highlighted, enabling budget managers or vote controllers to plan other commitments and disbursements effectively.

A major problem is that it can often encourage end-of-year rash spending as uncommitted resources are often expected to lapse. Rush orders for inappropriate services can be made for the purpose of committing unused cash balances just to make sure that funds are used.


Fund accounting is the approach or technique of accounting that reports in terms of funds rather than organisation. In this sense, a fund is a reporting entity and the financial reports generated are in respect of the fund. A fund is defined as a self-balancing unit in respect of which separate reports are generated. Separate books are kept for each fund, separate bank accounts are maintained, and separate financial statements are generated. Generally, funds are not comingled. The 1992 constitution of Ghana create the consolidated fund, the contingency fund, and authorises Parliament to have the liberty to create other funds through acts of Parliament or legislative instruments. Parliament has created a number of funds: the Ghana Education Trust fund (GET Fund), The District Assemblies Common Fund (DAC Fund), Road Fund, Petroleum Holding Fund, Heritage Fund, Stabilization Fund, Ghana Infrastructure Investment Fund (GIIF), Sinking Fund, The National Health Insurance Scheme Levy etc.