RESUME

PUBLIC SECTOR ACCOUNTING

Group 2: Asaquita Sophie Premarci (18312068)

Rania Abdul Aziz Baraba (18312225

Charging For Service

One of the main responsibilities of the government is to give service to the public and it can
be funded through tax or direct charge to the people as the user of the public service. If the
public service is funded from tax, people has to pay tax without minding whether they get the
benefit or not. However if the public service is charged directly to the user, those who are
paying are the one who will get the benefit.

A. Public service that can be sold

The word sold in this point means that it will be charged directly to the user only. And those public
service are:

1. Clean water
2. Public transportation
3. Communication and postal service
4. Residential area
5. Entertainment and recreation
6. Electricity
7. Education
8. Highway
9. Irrigation
10. Fire service
11. Health service
12. Waste service

Consumer can be charged only if;

1. Private goods or public goods

 Private goods are the goods that is needed by public but only can be accesed or
consumed by those who are willing to pay such as electricity, telecommunication, and
many more. Public goods are the goods that is needed by public but the benefit can be
enjoyed by public such as national defense, police service, and many more. In the
practice there is the combination of both goods (public and private goods) this type of
goods are needed by all people but not all can have the access to that goods such as
education.
2. Economic efficiency

While every individuals are free to determine how much goods or services they need, price
mechanism plays an important role in allocating resources through;

1. The distribution of who will get the most benefit then they should pay more.
2. Giving incentives in order to avoid any overspending by the people.
3. Giving incentives for the supplier related with production scale.
4. Providing resources for the supplier in order to increase the supply of services.

Without any price mechanism, supply and demand will never meet the balance point that will
eventually make the resource allocation inefficient. Cases like clean water services, medicine
availabilities, and so on are the examples.

However, in the reality and in the implementation, markets are usually imperfect.in many aspects
government could be the supplier but cannot take the advantages of the situation to maximize
advantages of their own interest. There are several case happened about taking advantage of this
kind of situation to only focus on their own division or their own self profit which it will eventually
effect to many things such as public will keep asking about the where the money that the
government spent going to and what for and what will be the product of the project and will it be
beneficial or not.

3. Profit principle

Government cannot fully seeking for profits but government also cannot fully seeking for public
satisfaction without earning money that in the end will be used to generate another profit to make
new project or increase public service.

Government at the same time have to fulfill the public necessity and also earning profit. Charging for
service is different with fee. Fee is the cost incurred of authorization or license given by the
government. In order to calculate the total cost there are several constraints because of reasons
such as;

1. We don’t know exactly how much the full cost to provide a service.
2. It is very difficult to measure the amount of consumption.
3. The charging is not considering the ability of the society to pay.
4. What are the cost that need to be considered.

If setting price is using marginal costing there are several things that we need to take a look such as;

1. Operational variable cost

2. Semi variable overhead cost
3. Replacement cost of assets and equity
4. Additional cost of assets and equity