China's accounting system and current

situation

Disadvantages of the original Governmental accounting system

For a long time, Chinese government departments have been implementing a budget accounting
system based on the cash basis of accounting. However, with the gradual establishment and
improvement of modern financial systems, implementing only budget accounting is no longer
sufficient to meet the needs of comprehensively strengthening government asset liability
management, improving government decision-making level, and building a transparent
government in the new stage. With the continuous improvement of China's Socialist market
economy system, the original accounting system has revealed more problems in the accounting
scope, accounting methods and other aspects, which has brought greater limitations to the
actual operation of government departments. Therefore, it is inevitable for our government
departments to carry out accounting reform.

（2） The Inevitable Requirement of Integrating with the International in the New Stage

The Party's report has clearly stated the need to accelerate the establishment of a modern
financial system and establish a central and local financial relationship with clear powers and
responsibilities, coordinated financial resources, and regional balance. This has put forward new
requirements for the management of Governmental accounting in China, so it has become an
inevitable situation to reform the Governmental accounting system in the new stage. At the same
time, under the background of the great development of economic globalization, it is more
urgent for China to improve the management level of Governmental accounting as soon as
possible and better integrate with the international community.

2、 Innovation and Breakthrough of New Governmental accounting System

The System issued this time is a major reform and improvement of the current Governmental
accounting system on the basis of drawing on the experience of excellent foreign government
system reform and inheriting the beneficial experience of our own administrative and public
institution accounting reform over the years. Compared to the current accounting system of
administrative institutions, it has the following significant innovations and breakthroughs.
（1） Added new accounting elements

The "System" establishes the accounting elements of the "5+3" model, which includes not only
the five elements of assets, liabilities, net assets, income and expenses, but also the three
elements of budget income, budget expenditure, and budget balance.

（2） Reconstructed the accounting model of Governmental accounting

1. Adopting the accrual basis and cash basis

Dual foundation. Financial accounting adopts the accrual basis, while budget accounting adopts
the cash basis. The introduction of the accrual basis accounting principle further strengthens the
financial accounting function, and more comprehensively, truthfully, and accurately reflects the
operational efficiency and sustainable development ability of the government. 2. Implemented
dual functions of financial accounting and budget accounting. Financial accounting is conducted
through five accounting elements: assets, liabilities, net assets, income, and expenses. Budget
accounting settlement is conducted through three elements: budget revenue, budget
expenditure, and budget balance. 3. We used both financial accounting reports and final
accounting reports. Financial accounting reports are calculated based on the accrual basis of
accounting, while final accounting reports are generated based on the cash basis of accounting.
The financial report and the final account report complement each other and jointly reflect the
budget implementation and financial situation of the Governmental accounting entity.

（3） Unified accounting system for government units

The System no longer distinguishes between administrative units and public institutions, but is all
unified into the Governmental accounting system. This reform has changed the current situation
of multiple accounting systems coexisting and inconsistent accounting policies in administrative
institutions, thereby improving the comparability of accounting information among government
departments and various units. It has also laid a solid institutional foundation for consolidating
financial statements of units, departments, and compiling departmental final accounts step by
step.

3、 Objectives of the New Governmental accounting System

（1） Standardize accounting for government units

In the new stage, with the transformation of China's government functions, the original
Governmental accounting system has exposed more irregularities. For example, in the current
Governmental accounting system, fixed assets are not depreciated, which cannot truly and
objectively reflect the impairment of assets due to depletion, resulting in incomplete
Governmental accounting accounting. In view of these shortcomings, the new Governmental
accounting system has been improved and reformed correspondingly, standardized the
accounting of government units, and more accurately accounted for government costs.

（2） Adapt to the needs of Governmental accounting reform

With the continuous improvement of the market economy system, China's Governmental
accounting system also needs continuous reform to meet the needs of government financial
management. The new Governmental accounting system better reflects the actual financial
situation of administrative units and provides a more comprehensive basis for their accounting
work, which is also an inevitable requirement for the continuous in-depth development of the
cause of administrative units and the changing accounting environment in China.

（3） Improve government decision-making ability and financial transparency

The current accounting system of the Chinese government is generally based on cash basis and
cannot accurately record transactions that have already occurred in the current period. This time,
the "System" innovatively introduced the accrual basis in government financial accounting, and
based on this, prepared government comprehensive financial reports, breaking the situation of
weakening financial accounting functions under the original cash basis, and further improving the
quality of accounting information and financial transparency. This reform has greatly changed the
situation of the public's distrust of the government due to the lack of information disclosure of
Governmental accounting. Increasing transparency and openness in government affairs has also
established a good government image, enhanced government credibility, and laid a good mass
foundation for the orderly development of government work in the future.

4、 Problems in the Implementation of Governmental accounting System

（1） Increased pressure on financial personnel

On the basis of solving the problems of non-standard accounting, incomplete accounting content,
and unreasonable preparation of accounting statements, the "System" also puts forward higher
requirements for the accounting work and personnel of administrative units. However, the
existing government finance personnel are not yet able to complete the implementation of new
changes in their work due to their unfamiliarity with the new system and inherent habitual
thinking in long-term work. The new Governmental accounting system has increased the
workload and work pressure of financial personnel, which may even cause them to resist,
increasing the difficulty of issuing and implementing the new Governmental accounting system.

（2） Lack of policy coordination and relevant linkage regulations

Due to the long-term implementation of the original Governmental accounting system, relevant
financial personnel have formed a fixed thinking, so the workload of this reform is very large. In
the process of Governmental accounting reform in the new stage, some measures and standards
lack effective implementation plans, which is likely to lead to the uncoordinated phenomenon of
Governmental accounting system. The renewal and use of the new system cannot be completed
overnight. Therefore, relevant departments need to constantly improve relevant policies and
systems and convergence provisions, provide buffer space for the convergence of the old and
new systems, and promote them safely and effectively.

（3） Lack of supervision system constraints

For the replacement of the old and new systems, the lack of an effective supervision system will
lead to a big discount in the implementation of the new system.

5、 Solution measures

（1） Increase publicity efforts and train financial personnel

In order to strengthen the understanding and interpretation of the "System" by financial

personnel, relevant departments should strengthen the promotion of the new system and
provide a good social atmosphere for the implementation of the "System". At the same time,
financial personnel should actively learn and research the new accounting system, update their
professional skills, enrich their financial knowledge system, and adapt to the actual business
operations of the new system as soon as possible.

（2） Strengthen policy coordination and ensure overall coordination

The "System" further improves the financial management level of government departments by
adjusting and improving the existing government system. But we must be clearly aware that the
implementation of a new system requires some adjustment time. During this period of time,
relevant policies and regulations should be adjusted according to the requirements of the new
system, economic status and trend of the times, so as to make full preparations for the
implementation of the new Governmental accounting system in the new stage. Due to the great
difference between the reform content of the System and the current Governmental accounting
system, it is easy to have a poor connection. Therefore, when connecting the old and new
Governmental accounting systems, we should fully study the differences between the two,
organize the overall coordination work, and ensure that the financial work can be effectively
connected after the implementation of the new Governmental accounting system.

（3） Carry out inspection work and build a supervision platform

In the new stage of accounting reform, in order to fully implement the "System", it is not only
necessary to strengthen the training of relevant financial personnel, but also to establish a sound
and sound supervision system. Build a practical and effective modern supervision platform to
regularly organize inspections, strictly supervise financial usage processes, and implement the
application of the "System" to a greater extent.
（4） Develop preparation guidelines and build information systems

The System also puts forward higher requirements for the preparation of government financial
reports after the use of double reports of financial accounting reports and final accounts. In order
to promote the smooth implementation of the new Governmental accounting system in
administrative units, relevant departments should formulate corresponding guidelines for the
preparation of reports, and make clear and specific provisions on the new requirements for
financial reports in the System, so as to facilitate the use of accounting personnel. In the context
of the rapid development of the Internet, in order to accelerate the application of the new
Governmental accounting system, it is necessary to timely update and adjust the financial system
and accounting software, build an information system that conforms to the trend of the times,
and accelerate the adaptation of relevant financial personnel.

6、 Conclusion

The reform of Governmental accounting system in China is a further improvement of China's

accounting system construction based on the reform experience of foreign governments and the
actual situation of China's social and economic development. The issuance of the System marks
that China has initially established a Governmental accounting standard system with Chinese
characteristics. The new Governmental accounting system not only enhances the transparency
and scientificity of the government's fund management and use, but also improves the financial
management level of administrative institutions. At the same time, the Finance Department
should also pay attention to and promptly solve any problems that arise in promoting the
implementation of the "System", and smoothly and gradually complete the replacement of the
old and new government systems from top to bottom.