The Government Accounting Prototype (GAP) uses Generally Accepted Accounting Principles (GAAP) to integrate government-wide cash, accrual, property, and budgeting activities in a single, explainable process. This integrated approach allows budgeting and accounting staffs to share common information that is accurate and reliable.

Application of a private sector (GAAP) standard ensures the integrity and comparability of GAP financial statements.  That is, like the private sector (and unlike current government practice), GAP’s general ledger accounts are the building blocks of its journal entries. GAP’s journal entries are summarized in a trial balance. The GAP trial balance generates all integrated accounting and budgeting financial statements. GAP’s integrated financial statements preclude the possibility of falsifying a report total (or totals) since related accounting and/or budgeting amounts will not agree or add to the correct summary-level amount. At the macro level, GAP ensures the integrity of the government’s agency and consolidated financial statement totals. 

GAP satisfies the integrated accounting, budgeting, operational, and reporting needs of federal, state, and local governments. (This generic approach is possible because GAP includes the budgeting processes and terminology common to all government operations while also incorporating standard GAAP accounting practices familiar to private and public sector accountants, alike).



The federal government does not have a single, explainable GAAP-style input / output standard for generating meaningful government financial statements. The reason for this is that government-wide accounting processes are subject to a varied assortment of conventional political and bureaucratic budgeting processes based on tradition, rather than logic. The result has been the establishment of a varied assortment of untested, politicized, nonintegrated accounting standards that lack fundamental accounting controls and the ability to generate even the most basic management report from a trial balance.  Manually manipulated totals serve no useful purpose.  A GAP-style process generates all financial statements from a single trial balance.

In short, the root cause of the governments’ failed financial systems is the absence of a credible government-wide integrated accounting and budgeting standard. The GAP process fills this void.


GAP is designed to replace government-wide, non integrated budgeting and accounting processes with a single standard that accommodates the needs of politicians, bureaucrats, accountants, and taxpayers, alike. GAP began with a review of the federal government’s input and output processes, Chart of General Ledger Accounts, journal entries, terminology, accounting and budgeting financial statement formats, and methodologies for recording its transactions.

GAP addresses the following five major components of an integrated government accounting and budgeting standard that is comparable with the private sector GAAP standard: 


  1. Chart of General Ledger Accounts

  2. Terminology

  3. Journal entries

  4. Linkage between GAP and GAAP financial statements

  5. Integrated financial statements


The Test Data and Analysis Section (discussed later) applies and illustrates the concepts discussed in

each of these five sections.  




The federal government’s Chart of General Ledger Accounts includes a myriad of unstructured accounts with questionable, and redundant descriptions that confuse, rather than inform, their users. Also, the crosswalk between the general ledger accounts (GLA’s) and the financial statement line item totals they should be generating from the trial balance are both unclear and inaccurate.

The GAP GLA's, in contrast, are organized sequentially to better summarize and highlight integrated accounting and budgeting account (and financial statement line item) totals. To further assist in this effort, GLA’s are color coded to clarify and explain individual and integrated relationships. The GAP Chart of General Ledger Accounts includes a skeletal list of accounts to illustrate key points of this process. These accounts can be expanded and organized to replicate the operation of any government operation.  Please access and print (in color) the GAP Chart of Accounts and glossary at this time (see left panel).



The GAP terminology that describes these processes is a compilation of federal government budgeting and private sector GAAP accounting terms. The federal government budgeting terms were chosen because of their generic application to all government operations. These generic budgeting terms appear in the glossary. GAP’s application and use of these terms is consistent with private sector GAAP operations.



The federal government’s journal entries (like other governments) include a mishmash of unstructured general ledger accounts and debits and credits that were never designed around, nor tested against, a credible standard. Thus, it is not surprising that the government’s resultant trial balances contain flawed accounting logic and produce financial statements that require ongoing manual adjustments - just to get the reports to balance.



The sole function of a journal entry is to record each “unique” (private sector or government) activity in a way that accurately reflects the accounting (and budgeting) impact on an entity's financial statements. This is accomplished using a combination of general ledger accounts, from the Chart of General Ledger Accounts, and debit and credit combinations that accurately reflect the impact on all financial statements. For private sector financial statements, journal entries consist of a single debit and credit for each recorded activity. For the GAP integrated accounting and budgeting financial statements, one or two sets of journal entries are required, depending upon the activity recorded. One set of entries records the budgetary impact. The second set of entries, if needed, records private sector type activities (liabilities, sales, purchases, etc.) using the GAP structured general ledger accounts.

The corporate (GAAP) Balance Sheet Formula (BSF) was used as the initial starting point in designing and testing both the GAP journal entries and financial statement formats. The GAAP BSF is shown below:  



Assets = Liabilities + Stockholders Equity *


    * corporate stock + revenue - expense + gain - loss


The GAP BSF that ultimately accommodated the varied journal entry combinations and  integrated budgeting and accounting financial statements is shown below.  



Assets + External Cash Sources (ECS) = Liabilities + Government Equity (GE)  *


      * funded budget + revenue - expense + gain - loss   


The following paragraphs summarize key points regarding the External Cash Sources (ECS) and Government Equity components of the above formula.

The EXTERNAL CASH SOURCES (ECS) portion of the GAP formula does not equate, in any way, with the corporate BSF. GAP’s related GLA’s and inclusion as a portion of the Balance Sheet is an application of GAAP’s double entry requirements. That is, for each debit, there must be an offsetting credit (and vice versa). A basic example will help to illustrate the point. Assume for example that a corporation sold bonds. The journal entry to record this activity for a corporation is a debit to cash and a credit to bonds payable. The GAP journal entry when the U.S. Treasury auctions bonds to the public is a debit to cash (actually budget receipts), a credit to bonds payable, “and” a credit to funded budget (to record the increase to that portion of the budget that is backed by Cash in Treasury). The dilemma now is that the transaction does not balance since a debit is missing. After endless testing of a wide array of options, the debit chosen to balance the transaction was External Cash Sources (ECS). This was done to identify and account for all moneys authorized to be collected by Congress as a budgetary source (but that include no Congressionally appropriated moneys).

A comparison between the corporate and GAP journal entries is illustrated below using the example of a $5,000 bond sale.

CORPORATION                         GAP                      

Cash                    5,000             Budget Receipts     5,000 

   Bonds Payable       5,000           Bonds Payable           5,000


                                                                      ECS - Budget Rcpts.  B/P    5,000

                                                 Funded Budget                  5,000




FORMULA                                  FORMULA


Assets = Liabilities + Stocholders Equity            Assets + ECS = Liability + GE


5,000   =  5,000                                                         5,000 + 5,000 = 5,000 + 5,000

                                                                                              10,000 = 10,000


The above analysis illustrates one key reason why a single government accounting standard has never before been developed (up until now) --  the “supposed” problem of double counting. While a GAP Balance Sheet will always be overstated by the ECS amount, the difference is consistent and explainable. The main point is that there is no double-count issue in the GAP budget reports.

The GAP GOVERNMENT EQUITY total compares with the corporate stockholder equity total.  The BSF's are used to illustrate the commonality of both processes, first, by comparing the consistent and explainable, differences in these totals. Second, the mechanics of computing these equity totals is examined using terminology that is unique to each operation.


The following equity formulas were produced by transposing the above formulas (formulas 1A and 1B) and solving for stockholders equity and GAP government equity.  




      FORMULA 2A



        FORMULA 2B



We can deduce from the above that GAP government equity will always exceed the corporate stockholder equity total by the ECS amount (because the related totals of government and corporate assets and liabilities are always equal).  

Two additional accounting formulas (not discussed previously) provide us with yet another perspective of the corporate and government equity formulas.  The first formula, formula 3A below, stockholders equity (SE) = capital stock (CS)+ retained earnings (RE), and the second formula, formula 3B below, government equity (GE) = total budget resources (TBR) - cash anticipated (CA) + retained income / expense (R I/E), identify the accounting (and budgeting) events that affect each of these equity accounts.


In order to provide a more user-friendly explanation of these technical formulaic terms, the formulas below are color coded to signify equality in totals (same colors) and differences (different colors).  The key that follows provides supplementary information on each of the formula components.  The analysis section ties this information together for non-accountant users.











GE = (CR + CA) - CA + R I/E











It is important to understand that, no matter the terminology used, stockholders equity and GAP's government equity is all about identifying and accounting for the various methodologies used in financing corporate and government operations. 


Stockholders Equity (SE) will increase as capital stock is sold and the corporation's profits and gains exceed their expenses and losses i.e. retained earnings increase (formula 3A).  By combining formulas 2A and 3A, we can view stockholders equity from yet a fourth perspective, as follows:








GAP's Government Equity (GE) is based upon an adaptation of the corporate stockholders equity formula.  That is, government budgets, total budget resources (TBR), are computed (at the beginning of the fiscal year) by adding the amount of cash realized (CR), or collected and in Treasury, plus the amount of cash anticipated (CA) to be collected during the fiscal year (See key 1 above).  During the fiscal year, the cash anticipated (CA) total is adjusted (or decreased) by the amount of cash that was not realized or collected.  Additional increases are reflected in the government's retained income / expenses - R I/E  i.e. revenue, gains, expenses and losses (See formula 3C above). 


By combining formulas 2B and 3B, we get another perspective on government equity, as follows:







GAP’s consistency in computing government equity provides a useful management tool in quickly assessing and / or analyzing the overall status of any given appropriation. For example, at the start of a fiscal year, a General Fund's government equity total should show a significant increase with an increase in financing, total budget resources (TBR) .  As the year progresses, government equity should gradually decrease as expenses are incurred and net effect of retained income & expense (R I/E) decreases.  In the case of a Trust Fund or Revolving Fund, on the other hand, government equity will increase if revenue exceeds expenses (+ R I/E) and decrease if expenses exceed revenue (- R I/E).





In the previous section, the analysis concentrated on the unique similarities and differences between the corporate and government equity formulas.  This section uses the information contained in formula 4A and formula 4B (above) to identify the common data elements and better compare these disparate processes. 


Formulas 4A and 4B were solved for the data elements that are common to both i.e.  assets - liabilities - retained earnings (and retained income / expense).  Modified versions of these formulas are presented below. 















Using a fundamental algebraic concept, we can state that since the right sides of both formulas 4A and 4B are equal, the left portion of these equivalent formulas must also equal, as represented below in formula 5:







Capital Stock = Total Budget Resources - Cash Anticipated - ECS




Based on the above formula, the corporate balance sheet capital stock total should equal the GAP balance sheet total budget resources minus cash anticipated minus ECS (assuming the same test data).  Access Test Data Year 1 - Preclosing Trial Balance (left inset), and you will note that GAP's logic does apply. 





Preparation of the corporate and GAP financial statements compares on a one-for-one basis. For example, in the private sector, financial statements are prepared as follows: (1) the income and expense GLA’s are summarized to produce the Income Statement; (2) the net effect of all Income Statements is incorporated in the Statement of Retained Earnings; and, (3) corporate assets, liabilities, capital stock, and the Statement of Retained Earnings data is summarized in a Balance Sheet.

Like GAP’s terminology differences, its financial statement titles were modified slightly (from that of a corporation) to more accurately reflect the government’s operation. Corporate and GAP financial statement comparisons appear in the next section, Test Data & Analysis Section. 

In a corporate setting, income is expected to exceed expenses. Thus, a corporation summarizes its income and expenses in an Income Statement. The government’s comparable financial statement, however, could be income or expenses, as explained earlier, depending upon the appropriation involved. Thus, GAP’s title is Income & Expense Statement. Likewise, in the corporate sector, the report used to summarize the net effect of all cumulative Income Statements is the Retained Earnings Statement. GAP’s comparable report is the Retained Income & Expense Statement. The GAP / GAAP Balance Sheets are also comparable.  




The big question, of course, is how is it possible to test (on paper) processes as large and varied as federal, state, and local governments? The answer is twofold. First, each government currently has its own unique non integrated budgeting process, accounting process, terminology, and non integrated financial systems. So, the processes are truly large, customized, and complex. GAP, on the other hand, integrates budgeting concepts and terminology common to government bureaucrats and private-sector accountants, alike.  Second, it is important to understand that while governments process millions of transactions (journal entries) each day, these entries include only a finite number of “different” journal entry structures (JES’s). Thus, the basic GAP JES’s can be used to record an infinite variety of journal entries and the full gamut of government accounting and budgeting activity. To test a government-wide accounting and budgeting process, therefore, it is only necessary to develop a methodology for testing these basic GAP JES’s using Generally Accepted Accounting Principles (GAAP) and budgeting processes that are familiar to both public and private-sector accountants.

The accounting model that follows applies the concepts discussed in GAP's  Chart of General Ledger Accounts and journal entry design section.  This is accomplished using test data (in the form of journal entries and amounts) to produce a trial balance (summarizing those journal entries) and, in turn, produce GAP's financial statements.  To eliminate questions regarding the appropriateness of these entries or the related processes, all GAP input / output compares on a one-for-one basis with a corporation.  The significance of the GAP process, again, is that both budgeting and accounting statements are generated from a single trial balance. This single accounting control ensures the integrity of both sets of independent financial statements and contrasts with the federal government's current accounting process where no such controls exist.

The government accounting and budgeting activity discussed and illustrated in this web site covers the full gamut of federal agency transactions, including the following:  treasury warrants, cash transfers (liability), anticipated treasury warrants, anticipated budget receipts, apportionments (current quarter & subsequent quarter), allotments, budget reserves, commitments, obligations, salary expenses/accruals, advances payable, advances earned, travel advances, travel expenses applied, reimbursements, refunds, gains on sale of assets, accounts receivable, bad debts expense, utility expenses, bonds payable, bond amortization, accounts payable, depreciation expense, prepaid expenses, purchase discounts, equipment transfers, cash collections, cash disbursements, year end closing entries, and adjusting entries.  

If you are interested in analyzing the GAP sample input / output, please access and print in color the budgeting and accounting activity for YEAR 1 (thru December 31, 2001) and YEAR 2 (January 1, 2002), see left panel.  GAP's test data includes two years of test data to illustrate the typical activity of a federal agency, the year end closing entries (for year 1), and the adjusting entries to open the new year's books (year 2).  

Detailed explanations of these items are as follows:


  1. JOURNAL ENTRIES includes sample journal entries that record the full gamut of corporate (GAAP) and government (GAP) journal entries.  A comparison is made of each journal entry to identify the similarities and differences between a corporation and government entity.

  2. PRECLOSING TRIAL BALANCE includes corporate and GAP trial balances that summarize the Appendix A journal entries.  Note that the general ledger corporate and governmental accounts and amounts are color-coded to identify the items where GAP and GAAP are easily compared on a one-for-one basis.  

  1. INCOME / EXPENSE illustrates the resultant corporate Income Statement and Retained Earnings Statement and GAP Income and Expense Statement and Retained Income & Expense Statement produced from the Appendix B trial balance.  Please note that there are no differences between the private-sector (GAAP) and public-sector (GAP) entity financial statements.  Thus, the net cost of operation is the same for both entities -- always.

  2. BALANCE SHEET illustrates the resultant corporate and GAP Balance Sheets produced from the Appendix B trial balances.  Please note the following:

  1. The Cash and Cash in Treasury both equal $524,750.  However, because of the unique nature of government budgeting requirements, it is necessary to describe and account for the government's cash in a manner that better integrates cash and budgeting functions.

  2. Total assets of both corporate and GAP Balance Sheets are equal, $579,700.

  3. The GAP Balance Sheet includes an additional section, External Cash Sources (ECS), which identifies all Congressionally "authorized" cash collections.  Note also that because of GAAP's double entry requirements, the $93,500 amount appears in both Cash in Treasury (60,000 + 33,500) and ECS sections.

  1. Total liabilities for both Balance Sheets are equal ($86,450).  

  2. Total capital stock ($600,000) equates with the "total funded cfy & pfy budget" ($693,500).  However, the "total funded cfy & pfy budget" amount will always be overstated by the External Cash Sources amount that appears in the Asset & External Cash Sources portion of the Balance Sheet. 

  3. Stockholders Equity is comparable with Government Equity but, again, with one consistent, explainable difference -- the External Cash Sources total, in this case, $93,500 (or 586,750 - 493,250).

  4. Total Liabilities & Stockholders Equity and Total Liabilities & Government Equity are also comparable but, again, with the above caveat.

  1. BUDGET REPORT AND BALANCE SHEET (Appendix B-3) illustrates GAP's ability to integrate the Budget Resource and Status Report (BRSR) and Balance Sheet totals.  The integrated GAP BRSR and Balance Sheet are produced from the Appendix B trial balance.  A brief description of BRSR lines their relationship with the Balance Sheet follows.  

  1. Line 1, Cash Realized (Prior Fiscal Year) includes moneys received in a prior fiscal year that has not been spent and is still available during the current fiscal year.  Line 1A, Unobligated Carryover (PFY), includes Cash in Treasury (0 in this example, that is available for the purchase of additional goods and services (also 0).  Line 1B, Unpaid Obligations, includes Cash in Treasury that is available for the payment of goods/services already ordered in a pfy (also 0 in this example).

  2. Line 2, Cash Realized (Current Fiscal Year), includes moneys "appropriated" and "authorized" by Congress to finance the government's various appropriations.  Line 2 A, Treasury Warrants, includes Congressionally appropriated moneys financed by the Treasury, typically via Treasury Warrants.  Note that the $600,000 amount appears on both the BRSR and Balance Sheet.  Line 2B, Cash Transfers (ECS) includes Congressionally authorized transfers from other government entities.  The $60,000 amount appears on both the BRSR and Asset portion of the Balance Sheet as well as the ECS portion of the Balance Sheet.  Line 2C, Budget Receipts (ECS) includes a $33,500 amount that also appears on the Asset portion of the Balance Sheet.  In addition, the ECS portion of the Balance Sheet consists of two separate Congressionally authorized funding sources, earned reimbursements ($5,000) and bonds payable ($28,500).

  1. Line 3, Cash Anticipated (Current Fiscal Year), includes that portion of the government's budget that is anticipated to be realized, or collected sometime during the current fiscal year.  On the Balance Sheet, Total Funded Budget (693,500) equals Total Budget Resources (712,500) less Cash Anticipated (19,000 = 10,000 + 9,000).

  2. Line 4, Total Budget Resources (712,500)  equals Line 1A (0) + Line lB (0) + Line 2A (600,000) + Line 2B (60,000) + Line 2C (33,500) + Line 3B (10,000) + Line 3C (0) + Line 3D (9,000). On the Balance Sheet, Total Budget Resources (712,500) minus Cash Anticipated (19,000) equals the Total Funded CFY Budget (693,500). As an internal accounting control, this total will always equal the Total Cash (Budget) (693,500) in the Asset Section.  

  3. Line 5A, Balances Available through the Current Quarter (9,300) equals Balance Sheet Current Quarter Budget (9,300).

  4. Line 5B, Balances Available through Subsequent Quarters (485,000) equals Balance Sheet Subsequent Quarter Budget (485,000).

  5. Line 6, Budget Reserve - Contingency (24,650) equals Balance Sheet Budget Reserve - Contingency (24,650).

  6. Line 7, Withheld Pending Rescission (0) equals Balance Sheet Withheld Pending Rescission (0).

  7. Line 8, Budget Deferral (0) equals Balance Sheet Budget Deferral (0).

  8. Line 9, Unapportioned (2,500) equals Balance Sheet Unapportioned Budget (2,500) and the net total of the funded budget/unfunded budget GLA's that appear in the Appendix B trial balance.

  9. Line 10, Commitments (5,000) equals Balance Sheet Commitments (5,000).

  10. Line 11, Obligations, (186,050) equals Balance Sheet Unpaid Obligations CFY (17,3000) + Expended Budget CFY (168,750).

  11. Line 12, Total Budget Resources (712,500) equals Balance Sheet Total Budget Resources (712,500).


  1. YEAR END CLOSING ENTRIES illustrates the full gamut of GAP year-end closing entries that are made for all government entities (and compare with GAAP).  Journal entry totals are based upon trial balance amounts appearing in Appendix B.

  2. POST CLOSING TRIAL BALANCE contains the post closing trial balance [preclosing trial balance + year end closing journal entries].



  1. ADJUSTING ENTRIES contains the adjusting entries that are made at the beginning of the next year.

  2. (OPENING TRIAL BALANCE contains the opening trial balance for year 2 - January 1, 2002.  

  3. INCOME / EXPENSE; BALANCE SHEET; INTEGRATED BUDGET REPORT AND BALANCE SHEET contain the GAP financial statements that are based upon the Appendix F  trial balance.



© Copyright 1999   Larry Fisher