Accounting for public administrative and non-business units is one of the most specialized fields in accounting, playing a crucial role in national budget management. Unlike the business sector, accounting in public administrative and non-business units demands absolute accuracy in adhering to budget estimates and legal regulations on public finance. This article will provide a comprehensive overview from theory to practice, especially the latest updates from Circular 24/2024/TT-BTC, helping you feel more confident when starting your accounting work in these units.
What is public sector accounting?
Accounting in public administrative units involves collecting, processing, verifying, monitoring, and providing information on budget revenue and expenditure, assets, and other resources at state agencies and public service units. This is a core management function that helps control the transparent use of public finances, ensuring that all state resources are used for their intended purpose, strictly adhering to budget estimates and current legal regulations. In this environment, accounting staff in public administrative units not only track monetary transactions but also effectively manage public assets and state financial funds.
Why is it necessary to comply with the new regulations on accounting for public sector organizations?
In line with the direction of public finance reform, the transition to the new regulations in Circular 24/2024/TT-BTC helps standardize the financial reporting system, gradually approaching international public sector accounting standards (IPSAS). The synchronized application of the new regulations in accounting for administrative and non-business units is not only a legal requirement but also helps these units improve their asset management capacity and minimize material errors in the annual state budget settlement process.
Key features of accounting in administrative and public service units.
Accounting in public administrative units has very distinct characteristics compared to accounting in private enterprises, mainly in terms of the subjects and methods of capital management.
Applicable subjects and scope of regulation
The accounting system for administrative and non-business units is widely applied to many different types of organizations within the state apparatus, specifically including the following units:
- State agencies and government bodies from the central to local levels.
- Public service units operate in essential fields such as education, healthcare, science, and technology.
- Political organizations and socio-political organizations that utilize and account for state budget funds.
- Project management boards utilize public investment funds and non-budgetary state financial funds.
Specifics regarding funding sources and expenditure management.
In these units, funding does not come from the sale of goods or the provision of commercial services alone, but primarily from public resources.
- A clear distinction should be made between autonomous funding (where the unit has the right to independently arrange its spending) and non-autonomous funding (spending according to specific goals and tasks set by the state).
- Strictly manage revenue from professional activities such as tuition fees, hospital fees, and other revenue-generating public services in accordance with the state's list of fees and charges.
- Expenditure control mechanism through the State Treasury: All expenditures in the accounting of administrative and non-business units must be within the budget and their validity must be checked before payment is made.
A brief comparison with business accounting.
Unlike corporate accounting, which focuses on profit and revenue, accounting for public administrative units focuses on budget management and ensuring expenditures are carried out according to regulations. Public units typically use account types 5 (Revenue) and 6 (Expenses) to reflect budget income and expenditure, rather than accounts reflecting purely cost of goods sold and business profits. The biggest difference is the presence of off-balance sheet accounts (type 0) used to track budget estimates, a concept completely unfamiliar to corporate accounting but a core element of accounting for public administrative units.
Key changes in Circular 24/2024/TT-BTC on accounting for administrative and non-business entities.
Circular 24/2024/TT-BTC marks a major turning point in the modernization of accounting practices for administrative and non-business units in Vietnam.
The latest accounting chart of accounts
The accounting system has been refined to more accurately reflect modern financial transactions:
- The updated list of newly added accounts aims to accurately reflect economic transactions in the context of digital transformation and modern public asset management.
- Shifting the accounting mindset from cash accounting to accrual accounting helps accountants in administrative and public service units accurately reflect the economic nature of transactions, instead of simply accounting based on cash flow as before.
Regulations on accounting documents and records
The new circular creates flexibility while still ensuring strict control over document management:
- The list of mandatory documents for transactions directly related to the state budget and treasury is clearly defined to avoid errors in accounting for administrative and public service units.
- The autonomy mechanism in designing internal documents allows the unit to be flexible in management while still ensuring full compliance with legal requirements as stipulated in the 2015 Accounting Law.
- Electronic accounting practices are encouraged, ensuring data connectivity and information security in accordance with the new accounting standards for administrative and public service units.
Changes in the way financial statements are prepared and presented.
Financial reports are no longer just dry statistics; they are now tools for evaluating the performance of an organization.
- A financial statement focuses on reflecting the assets and liabilities of an entity at a specific point in time.
- The performance report clearly separates results from budget allocations, retained fees, and service business operations.
- The explanatory notes to financial statements in the accounting of administrative and non-business units require more detail regarding the accounting policies applied and explanations of significant changes during the period.
Guide to accounting for common administrative and public service transactions.
To help newcomers visualize the process, here is a guide to handling the most important aspects of accounting in administrative and public service units.
Accounting for state budget funds
This is the most frequently occurring operation, involving funds from the state budget:
- The business process begins with receiving the budget notification, withdrawing the advance budget for expenditure, and finally settling the advance at the State Treasury to convert it into actual expenditure.
- Accountants in administrative and public service units need to handle accurately when adjusting budget estimates, transferring funds to the following year, or returning unspent funds to the state budget at the end of the fiscal year.
Accounting for revenue and expenditure of business operations.
For revenue-generating entities such as hospitals or schools, tracking these revenue sources is crucial:
- Reflecting revenue from the unit's revenue-generating activities in accordance with the provisions of Law No. 97/2015/QH13 on Fees and Charges.
- The accounting method for corresponding expenses is used to accurately determine surpluses or deficits, thereby providing a basis for allocating unit funds in accordance with regulations on financial autonomy.
Managing depreciation and amortization of fixed assets.
Managing public assets requires meticulous attention to detail in classifying and calculating depreciation:
- The current criteria for determining fixed assets are applied according to Circular 23/2023/TT-BTC of the Ministry of Finance, with a value threshold of 10 million VND or more and a useful life of more than 1 year.
- It is necessary to clearly distinguish between depreciation (recording the decrease in value of assets used for administrative management at the end of the year) and amortization (recording monthly expenses for assets used in service and business operations).
To clarify the difference between wear and tear and depreciation in accounting for public administrative units, you can refer to the summary table below:
| Comparison criteria | Calculating asset depreciation | Depreciation of assets |
|---|---|---|
| Object | Assets used for administrative activities and projects. | Assets used for production, business, and service activities. |
| Frequency of execution | Perform this once at the end of the fiscal year. | Perform this on a monthly basis. |
| Purpose | Reflecting the remaining value of public assets. | Capital recovery and service cost determination |
| Accounting method | Record the decrease in asset value and the source of funding. | Record an increase in expenses and a decrease in asset value. |
Note that some assets may be subject to both depreciation and amortization if they are used for a variety of purposes within the organization.
Procedure for preparing annual financial settlement reports
Final accounting is the most stressful but also the most important stage in completing an accounting cycle for an administrative and public service unit.
Compare the data with the state treasury.
Before preparing the report, the accountant must ensure that their figures "match" those of the Treasury:
- Conduct periodic (monthly, quarterly) and year-end reconciliations between the unit's accounting records and the confirmation statements of budget balances and deposit balances at the State Treasury.
- This guide addresses common errors such as incorrect program codes, item type codes, or mistakes in the budget withdrawal process that lead to discrepancies in actual expenditure figures.
Compile data and finalize the report.
After the reconciliation is complete, the accountant begins the process of closing the books and preparing the report.
- The closing procedure involves checking the balance between off-balance sheet accounts (type 0) for budget management and on-balance sheet accounts (types 1 to 9).
- The technique for preparing financial settlement reports in the accounting of administrative and non-business units ensures the accuracy and consistency between accounting data and actual expenditure data approved and confirmed by the Treasury.
Points to note to avoid errors when settling accounts.
Accounting in administrative and public service units needs to pay special attention to expenditures exceeding allocated limits, expenditures from incorrect funding sources, or the use of invalid supporting documents. These are issues that are easily subject to rejection (rejection of final accounts) by inspection and auditing agencies during periodic audits. Rejection not only affects the unit's reputation but also creates difficulties in balancing the budget for subsequent years.
Administrative and public sector accounting exercises with solutions help reinforce knowledge.
Below are some illustrative exercises to help you review the basic accounting procedures for administrative and public service units that you have just learned.
Exercises on budget withdrawal and regular operating expenses.
Situation: The unit received a budget allocation of 500,000,000 VND for regular operating expenses. During the month, the unit issued a withdrawal order to transfer funds for electricity and water bills totaling 20,000,000 VND and for office supplies purchases totaling 10,000,000 VND.
Guidelines for accounting entries in administrative and non-business units:
- Upon receiving the budget estimate: Debit Account 008 (Regular Budget Details): 500,000,000 VND.
- When withdrawing funds from the electricity and water budget: Debit Account 611 / Credit Account 511: 20,000,000 VND; simultaneously, credit Account 008 (Actual expenditure details): 20,000,000 VND.
- When withdrawing funds from the budget for purchasing office supplies: Similarly, debit account 611 / credit account 511: 10,000,000 VND; and simultaneously credit account 008 (Details of actual expenditure): 10,000,000 VND.
Exercises on determining operating results and fund allocation.
Situation: At the end of the year, the accountant of an administrative and public service unit determined a surplus of VND 100,000,000 from consulting services after fulfilling all tax obligations to the state. According to the internal expenditure regulations, the unit allocated VND 40% to the fund for the development of public service activities and VND 60% to the reward and welfare fund.
Instructions for journal entry:
- Transferring surplus: Debit Account 421 / Credit Account 431 (Details for each fund).
- Allocation from the career development fund: 40,000,000 VND.
- Allocation from the reward and welfare fund: 60,000,000 VND.
Administrative and public sector accounting documents and an effective learning roadmap.
To become a skilled accountant in a public sector organization, you need a structured learning path and access to reliable resources.
Fundamental legal documents
Below are the essential documents that any accountant working in a public administrative unit must master:
- Accounting Law No. 88/2015/QH13: General regulations on accounting work in Vietnam.
- The 2015 State Budget Law: The legal basis for managing national budget revenue and expenditure.
- Circular 24/2024/TT-BTC: The most detailed guide on the current accounting regime for administrative and non-business units.
- Circular 23/2023/TT-BTC: Guidance on the management and calculation of depreciation and amortization of fixed assets at public units.
Specialized accounting tools and software
In the age of technology, the use of specialized accounting software for administrative and public service units is inevitable:
- The application of widely available software helps automate data entry processes and minimize errors when generating settlement reports for the Treasury.
- Utilize online public accounting communities on social media or professional forums to exchange practical experiences regarding accounting for administrative and public service units arising in the locality.
Contact information MAN – Master Accountant Network
- Address: No. 19A, Street 43, Tan Thuan Ward, Ho Chi Minh City
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Content production by: Mr. Le Hoang Tuyen – Founder & CEO MAN – Master Accountant Network, Vietnamese CPA Auditor with over 30 years of experience in Accounting, Auditing and Financial Consulting.
Frequently Asked Questions about Public Sector Accounting
What accounting modules should beginners in public sector organizations focus on first?
You should start with the budget management and withdrawal functions at the Treasury. This is the core of accounting for public administrative units. Once you understand how budget cash flow works, other functions such as asset management or revenue and expenditure will become much easier to understand.
How can we quickly differentiate between funding sources within the organization?
The simplest method is to rely on the Budget Source Code in the State Budget Classification system. In accounting for administrative and public service units, each funding source (regular, irregular, etc.) will have a unique code number to help you account for and track funds without confusion.
Do accountants in public administrative units need to file tax returns like accountants in businesses?
If the entity generates revenue from service or business activities, it must still declare and pay value-added tax and corporate income tax according to regulations, similar to a business enterprise.
