A PROJECT REPORT

ON
AN INTRODUCTION TO GOVERNMENT ACCOUNTING
S Y S T E M IN NEPAL

ESTD. : 2000 A.D.

MITHILA INSTITUTE OF TECHNOLOGY
(Higher Secondary +2 School)
Bishara Chowk-4, Janakpurdham
Batch Year: (2079-2080) B.S
Submitted By: Submitted To:
Name: MITHILA INSTITUTE OF
Class: Eleven (11) TECHNOLOGY
Section: ‘E’ Under the guidance of
Roll No.: Mr. Birendra Sah
Management Stream
Date: 2079/ /
Signature
 CERTIFICATE

This project report entitled “An Introduction to

Government Accounting System in Nepal” by under the
guidance and supervision of Mr. Birendra Sah during the academic year
(2079-2080) B.S. is here submitted to MITHILA INSTITUTE OF
TECHNOLOGY for the partial fulfillment of account practical
examination conducted by N.E.B. (National Examination Board),
Kathmandu of grade 11 has been accepted.

Supervisor
Mr. Birendra Sah
MITHILA INSTITUTE OF TECHNOLOGY
(Higher Secondary +2 School)
Janakpurdham-4, Nepal.
Date: 2079/ /
I
 STUDENT DEC LARAT IO N

I, a student of college, MITHILA

INSTITUTE OF TECHNOLOGY, pursuing +2 course here by declares
that the project work entitled “An Introduction to Government
Accounting System in Nepal” and its value added services is an original
work carried out by me availing the guidance and supervision of Mr.
Birendra Sah to my entire satisfaction. This report bears no resemblance
with any other report submitted to MITHILA INSTITUTE OF
TECHNOLOGY during the current academic year earlier to another
college for the award of any degree. I am presenting this report during the
year (2079-2080) B.S. in partial fulfillment of account practical
examination conducted by N.E.B., Kathmandu.
I also confirm that the report is only prepared for our academic
requirement not for any other purpose. It might not be used with interest
of insulting and harming any one. I also declares that this report work is
not submitted to any other college for any degree.

Date: 2079/ /

II
 ACKNOWLEDGEMENT

The final outcome of this project report required a lot of guidance and
assistance from a number of people and I am extremely fortunate to
receive such proper supervision for the completion of this project.
Whatever I have done in this project is only due to such instructions and
assistance and I would not forget to thank them. I am debated to
MITHILA INSTITUTE OF TECHNOLOGY, Janakpurdham-4 for
providing me such an expressive platform for this project. I am heartily
grateful to the project supervisor and our gratified lecturer of Account,
Mr. Birendra Sah.

I am also thankful and fortunate enough to get constant encouragement,

support and guidance from them, who helped me in finalizing my project
work. I also thank all the organization that provide necessary information
for this report.

Lastly, I thank all my friend, especially my close friend Rahul, my parents

and brothers & sisters for their tremendous contributions and support
both morally and financially towards the completion of the project.

III
 ABSTRACT

This paper aims at disseminating knowledge about an introduction of

government accounting system in Nepal. In doing so, the paper examines
that government accounting is that branch of accounting which helps in
recording, classifying, summarizing, analyzing & interpreting and
communicating the financial information’s to government both
external and internal users. The main motive of government
accounting is to utilize the public fund for welfare and infrastructure
development.

Government accounting aims at preventing services and establishing a

balance between optimal expenditure and services by managing
government assets and government sources in the most efficient way.
This balance can be established only by obtaining complete and accurate
information from government accounting system in time. Since the users
have a low level of knowledge needs in government accounting system,
it has been recorded for long years and still it is going on ignoring accrual
basis of accounting. Government accounting has its own unique
characteristics, importance and objectives for recording the financial
transactions incurred inside the government offices.

This project report or study aims to explain the historical development of

government accounting in Nepal as well as its features, advantages,
objectives and limitations too.

IV
 CONTENTS

S.N. Topics Page No.

1. Introduction VI - X I
1.1 Concept and Meaning of Government Accounting VI
1.2 Historical background of Government Accounting VII-VIII
1.3 Evolution or Types of Government Accounting VII I - X
1.4 Objectives of Government Accounting X
X
1.5 Characteristics of Government Accounting
1.6 Limitations of Government Accounting X-XI
1.7 Difference between Business & Government
Accounting XI
1.8 Central and Operating Level Accounting XI
2. Objectives of the Study XII
3 Research and Methodology XII
3.1 Primary Source of Information XII
3.2 Secondary Source of Information XII
4. Literature Review XIII-XIV
4.1 Introduction XIII
4.2 Concept and Definition XIII
4.3 History XIII
4.4 Challenges and Issues XIV
5. Conclusion and Suggestions XV
6. Bibliography XVI

V
1. INTRODUCTION
Account is the process of identifying, collecting & recording, classifying,
summarizing, analyzing & interpreting and communicating the financial
information’s to the internal and external users to know the financial
result as per requirement. It is an art of recording transactions
according to sizes, nature, and types of organizations. The accounting
can be classified into two categories such as:
i. Government Accounting
ii. Business/Commercial Accounting
1.1 Concept and Meaning of Government Accounting
Every government office performs various governmental and
financial activities in operating such financial activities, financial
transaction that is revenue and expenditures are incurred in
government office. Accounting system used and applied by
different government offices to record financial transactions that is
revenue and expenditure of government offices is known as
government accounting. It is the process of identifying,
collecting& recording, classifying, summarizing analyzing &
interpreting and communicating to the concerned authority with all
the financial transactions made by a government body.

According to Oshisami and Dean, “Government Accounting is

the process of recording, analyzing, classifying, summarizing,
communicating and interpreting financial information about the
government in aggregate and in detail, reflecting all the transactions
involving the receipts, transfer and disposition of government fund
and property.”

The principles and procedures of government accounting are

governed by government financial rules, regulations and acts that
may provide the relevant information for formulation of plans and
policies for taking important financial decision. It helps to analyze
the financial transactions of government body.
VI
1.2 Historical background of Government Accounting
Government Accounting was first introduced in Nepal in the
Lichchhavi period to record the revenue and expenditure of the
government, the recording system came into practice. During this
period, the different sources of collecting government revenues
were trusts (Guthis), property taxes (Jinsikar), voluntary labor
(Shramdan) from general public. The revenue were utilized in war,
construction of temples, expenses of royal family, salary of
government employees, performing of religious rites (Puja/Yagya),
etc. With the extension of traded link with Tibet, revenue form trade
and customs were also added to the list of sources of revenue during
the Malla Period.

After the unification of Nepal in 1825 B.S., Prithivi Narayan Shah

tried to make improvements in the accounting system. The
milestone of that period in the field of account was introduced of
‘Laldhadda’ to record revenues and administrative
expenses in 1871 B.S. and ‘Mothdhadda’ to record land and its
revenue.

Establishment of Nijmati Kitab Khana in 1925 B.S. brought the

system of recording the history of employees and detail about
salary of the government offices. The office s functioning still
today. In 1936 B.S. Khardar Gunwant, a government employee,
introduced ‘Syaha Shrestha Pranali’ accounting system to
maintain revenues and expenditures. The Syaha Shrestha Pranali
was an advanced form of recording the transactions which
remained in practice up to fiscal year 2022/23 B.S.

After the establishment of democracy in 2007 B.S., the government

became more responsible to maintain books of accounts. As a
result, the budget system was started in 2008 B.S. In 2016 B.S.,
“Procedure Rule for Government Fund Expenditure 2016” was
enacted with a view to bringing uniformity in financial
administration. Then, in Baisakh 2017 B.S., Bhuktani Sresta
Pranali was introduce. But this
VII
 System of government accounting could not last long as New
Accounting System was introduced as per recommendation of
accounts committee. On 20th Magh, 2017 an account committee was
formed to study and make suggestions for an appropriate and
scientific accounting system. After the detailed study for 288 days,
the committee presented a draft to the finance secretary which got
recognition from the Auditor General and final approval from king
Mahendra in 2018 B.S. This accounting system is known as ‘New
Accounting System’ of Government of Nepal, which was scientific
and systematic. This System has been followed by Government of
Nepal since the fiscal year 2019/20 and still is in practice these days.
1.3 Evolution or Types of Government Accounting
Before the introduction of New Accounting System, various
accounting systems were in practice in Nepal. A single and uniform
system of accounting was lacking to record the financial
transactions. A short introduction of accounting system that was in
practice in Nepal before New Accounting System is presented
below:
a) Wasil Banki Sresta Pranali:
It was a simple statement to record the revenue and expenditure
of government. It was suitable for those offices which were
established to record a small number of transactions and for a
short period of time. It was based on single entry system of book
keeping where the revenues were recorded on one side of page
and expenditure on the other side. So, it was easy to find out total
revenues and expenditures under it; books were closed at the end
of year or after the completion of work. This system was not able
to analyze the transactions under a number of heads. This system
was incomplete and unscientific, so it could not fulfill the need
of increased transactions.
b) Syaha Sresta Pranali:
This system was propounded by Khardar Gunwant in 1936 B.S.
It was more scientific and systematic than Wasil Banki Sresta
Pranali.
VI I I
 Revenues and expenditures could be recorded on the same leaf
along with their total and balances. Under this system, the
following three types were used.
i. Syaha
It was the primary record of financial transactions like journal
voucher. It was prepared in ‘T ’ shape by providing a number of
columns for incomes and expenditures. A leaf was folded into
different creases according to the requirement. It was divided
into two parts. The right hand side was used to record
expenditures and left side was used to record incomes.
ii. Awarje
It was familiar to the ledger. It was to keep the record of financial
transactions in a classified manner according to the heads of
income and expenditures. It facilitated to accumulate the similar
nature of transactions under a single heading.
iii. Dhapot
It was a final statement, which was used to report revenues and
expenses in summary form to represent the real position of the
public fund on a given date.
c) Faram Sresta Pranali:
When the number of financial transactions of the government
offices became voluminous, Syaha Sresta Pranali became unable
to fulfill the requirement. As a result, Faram Sresta Pranali was
introduced in 1968 B.S. Specially to record the land revenue of
Terai and city area of kingdom of Nepal. 51 different types of
forms were used in practice to record the financial transactions
and hence it was called Faram Sresta Pranali.
d) Bhuktani Sresta Pranali:
Bhuktani Sresta Pranali was developed in 2008 B.S. to maintain
the systematic record of revenues and expenditures of
government offices according to the budget heads. It was based
on double entry book keeping system, which classified the
government offices into the central and operating level for
systematic recording of public funds.
IX
 e) New Accounting System:
New Accounting System is a modified system of Bhuktani Sresta
Pranali from which financial transactions are used in recording
through digital pattern and using the concept of Treasury Single
Account. This system ensure the transparency and accountability
in recording and examining the books of account in government
offices.

1.4 Objectives of Government Accounting

Some of the major objective of government accounting are listed
below:
a. To record the government revenues and expenditures incurred in
government offices.
b. To provide the financial informations from the books of record
to the external and internal users.
c. To help in auditing and taxation functions.
d. To provide the information of resources available in government.
e. To do expenditure based on the budget.

1.5 Characteristics of Government Accounting

Some of its basics features or characteristics are listed below:
a. There is absence of profit in government accounting.
b. It is based on double entry principle.
c. It is simple to use and flexible in nature.
d. It is based on financial acts and rules of nation.
e. It provides necessary financial informations to all the users.

1.6 Limitations of Government Accounting

Some of limitations of government accounting are listed below:
a. It is expensive in nature for small government organization with
limited number of transactions.
b. It deals about the use of double entry principle theoretically but
ignores in real practice.
c. It ignores accrual basis of accounting.
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 d. It records advance as memorandum as separate ledger account is
not prepared.
e. It ignores cost benefit analysis.

1.7 Differences between Business and Government Accounting

The difference between business and government accounting are
listed below in a table:
Business Accounting Basis Government Accounting
It is prepared by commercial Preparation It is prepared by
organizations. government organizations.
It is based on cash or accrual Based on It is based on cash basis of
basis of accounting accounting only.
Directions are provided Direction Directions are provided
from owner. from central level office.
It is guided and controlled Control It is totally control by
by capital fund. budget
It uses both cash and Banking Most of the government
banking transactions in Transaction operation are executed
business operation. through bank.
Table: Differences between Business and Government Accounting

1.8 Central and operating level Accounting

An accounting system used and applied by central level office to
record revenue and expenditures is known as central level
accounting. Central level office is fully responsible for maintaining
central level accounting to record financial transactions. Such office
prepares plans and policy related to budget.

An accounting system used and applied by operating level office to

record revenue and expenditures of financial activities is known as
operation level accounting. Such accounting is maintained by
operating or functional level office. It follows the principles and
guidelines as prescribed under directives of central level office.
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2. OBJECTIVES OF STUDY
I employed the following objectives to carry out the research;
1. To explore the present situation of the government offices.
2. To know about the role of government to maintain the financial
condition of Nepal.
3. To identify the characteristics, importance, advantages, objectives,
and limitations of the government accounting system in Nepal.

3. RESEARC H AND METHODOLOGY

The investigation or study on an introduction to government accounting
in Nepal was accomplished using both primary and secondary sources of
information:

3.1 Primary Sources of Information:

Under this source of information, I had visited the concerned
authority & department for collecting data, statistics and facts.
I snapped photographs, read inscriptions and notice, invested
them for getting the required informations.

3.2 Secondary Sources of Information:

Under this source of information, surfing through internet was
done regarding the government accounting system in Nepal to
get the preliminary information about it. I even read old books
and articles from different websites of different authors and
publishers available through different sources to widen our
knowledge about the government accounting in Nepal.

XII
4. LIT ERATURE RE VI E W
4.1 Introduction
Government Accounting is a critical aspect of financial management that
involves the collection, recording, analysis and reporting of financial
transactions and other activities of the government accounting. In Nepal,
government accounting plays a vital role in ensuring transparency,
accountability and good governance. This literature review aims to
provide an overview of the introduction to government accounting in
Nepal.
4.2 Concept and Definition
The branch of accounting which helps in recording, classifying,
summarizing, analyzing and interpreting and communicating the
financial informations to government users. The main motive of
government accounting is to utilize the public fund for public welfare and
infrastructure development.
4.3 History
The concept of accounting was first introduced in Nepal during the
Lichchhavi period. During the Malla period, revenues were collected
from customs and trade, and a book called "Laldhadda" was brought into
use to record government revenues and expenditures. King Prithivi
Narayan Shah established Kumari Chowk Adda in 1828 B.S. and a new
accounting system was propounded by Khardar Gunwanta in 1936. In
16th Asadh 2016 B.S., King Mahendra Bir Bikram Shah established a
committee called "Account Committee" to bring uniformity in accounting
system. The government followed accounting system based on the double
entry system of book keeping until 2019 B.S.

XIII
4.4 Challenges and Issues
Government accounting in Nepal faces several challenges and issues. One
of the main challenges is the lack of skilled human resources in the field
of accounting. This often leads to a delay in the preparation of financial
reports, which can affect the decision-making process of the government.
Additionally, there are issues with outdated accounting systems, which
can result in inaccuracies in financial reporting. The lack of transparency
and accountability in government accounting is another major issue,
which can lead to corruption and misuse of public funds. Finally, the
inadequate budget allocation for the accounting sector also contributes to
the challenges faced by government accounting in Nepal.
One of the major challenge is the lack of capacity and expertise among
government officials in implementing and managing the new accounting
system. This has led to delays in the implementation of the system and a
lack of quality financial reporting. Another challenge is the limited use of
technology in government accounting. Most government agencies still
relay on manual processes for recording and reporting financial
transactions, which are time consuming and prone to errors. The lack of
reliable and accurate financial data has also made it difficult for the
government to make informed decisions and effectively manage public
finances.

XIV
5. CONCLUSION AND SUGGESTION

Government Accounting System is critical function for the Nepalese

government, providing essential financial information that helps
government to make release of budget for public welfare and infrastructural
development. This literature review has provided an overview of the history
of government accounting system in Nepal, the importance of government
accounting, and the challenges & issues in government accounting done in
government offices by government officers. By understanding these
concepts and the best practices government can improve their financial
management and achieve greater success.

The government should implement electronic payment systems to ensure

transparency and accountability in financial transactions. Increase
budgetary transparency by publishing detailed budget reports and financial
statements. Improve tax collection by simplifying regulations, reducing
exemptions, and improving tax administration. Strengthen internal controls
to prevent fraud and misappropriation of funds. Enhance capacity building
by providing training and resources to staff responsible for managing
government accounts. Increase public awareness through public campaigns,
seminars, and workshops. Engage in international best practices to ensure
Nepal's government accounts are managed according to global standards
and best practices.

XV
6. BIBLIOGRAPHY

 Bishnu Kumar Pandey & DR. Binod Shah (2020), Principles of

Accounting-I: Dreamland Publication, Kathmandu, Nepal.

 Pramod Parajuli (2075), Office Practice and Accounting: Green Book

Publication, Kathmandu Nepal.

 Jitendra Pd. Upadhyaya, (2079), Principles of Accounting-I: K E C

Publication, Kathmandu, Nepal.

 Banajree, A. (2009). Financial Accounting: A Managerial, Third Edition:

Excel Book Publishing, New Delhi, India.

 T S Grewal (2021), Double Entry Book Keeping: SC S Publication, New

Delhi, India.

 Dk Goel (2019), Accountancy for Grade 11: Arya Publication, New

Delhi, India.

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