What are Public Accounting Principles?

Accounting Principles: Montana local governments are required to manage and account for their financial activities in accordance with Generally Accepted Accounting Principles (GAAP), as set forth by the Governmental Accounting Standards Board (GASB) (2-7-504 MCA, 2.4.401 & 2.4.411 A.R.M). GASB is the recognized authority with respect to governmental accounting. Managing the local government’s finances in accordance with GAAP and with the rules set forth by GASB, provides the citizens assurance that their public funds are being accounted for in a proper manner. Compliance with GASB’s standards is enforced through the audit process, when auditors render an opinion on the fairness of the financial statement presentations in conformity with GAAP. 

The information needs of the users of government financial statements are different from the needs of the users of private company financial statements. A government’s performance cannot be assessed by profit, which is the main objective of businesses. Governments have objectives other than profit maximization. Therefore, governments need accounting principles and reporting systems that differ from those of businesses. 

Montana Municipal Officials Handbooks 3rd Edition, Section 5.301