Accounting Act: National Revenue, Expenditure, and Contracts

The Accounting Act establishes the basic procedures for Japan's national accounting, including how national revenue is collected, how expenditure is committed and paid, how government contracts are made, and how treasury funds are handled. It is most often consulted by officials and contractors who need to trace the legal basis for budget execution, public procurement, payment, or cash-handling procedures. This article explains the Act's main operating mechanisms and its relationship with delegated rules, but it does not cover agency-specific accounting manuals or individual payment decisions.

Closing the Fiscal Year and Separating National Cash Flows

The Accounting Act begins with the mechanics that make national accounting different from ordinary bookkeeping: each fiscal year's revenue and expenditure must be assigned to the correct fiscal year, and the revenue and expenditure cash flows are handled through separate functions. Article 1 requires the disbursement and receipt affairs for a fiscal year to be completed by July 31 of the following fiscal year, under rules prescribed by Cabinet Order. Article 2 also states the principle that the head of each ministry or agency must pay revenue under that agency's jurisdiction into the national treasury rather than using it directly.

This design matters because the Act is not merely a recordkeeping statute. It creates a controlled path from legal authority to collection, custody, commitment, payment, and auditability. Revenue is not treated as a fund that the collecting agency can spend on its own initiative. Expenditure is not treated as a simple cash payment whenever an invoice arrives. The Act instead assigns different steps to different officers and uses Cabinet Orders for operational details.

Revenue Collection and Treasury Receipt

Revenue provisions focus on who may collect and receive money owed to the national government. The Act distinguishes collection, which concerns the administrative determination and notice of what is owed, from receipt, which concerns the handling of money once payment is made. The Minister of Finance manages revenue collection and receipt affairs generally, while each ministry or agency head manages revenue under that agency's jurisdiction.

The Act assigns collection to a Revenue Collection Officer and requires that officer, when collecting revenue, to investigate and determine the amount and give notice of payment except where a Cabinet Order provides otherwise. Receipt of revenue is handled by a Cash Accounting Official, unless the work is assigned to a cashier or handled by the Bank of Japan. Once money is received, the Cash Accounting Official or cashier must pay it into the Bank of Japan without delay.

The separation between collection and cash receipt is one of the Act's practical control devices. Article 8 provides that the duty of revenue collection may not also be held with the duty of cash accounting, subject to Cabinet Order exceptions for special necessity. For a reader checking a public charge, repayment, refund, or collection process, this means the Act asks two different questions: who determined the revenue obligation, and who actually received and deposited the money?

Commitments of Expenditure Before Payment

The expenditure chapter is built around a staged process. A government payment begins before cash moves: the responsible office must first make a commitment of expenditure in accordance with laws and the budget. This is the legal and budgetary control point that connects a proposed obligation with the appropriated budget, continuing expenditure, or treasury obligation authority that supports it.

Article 10 gives each ministry or agency head control over commitments of expenditure and expenditure affairs under that agency's jurisdiction. Article 11 requires commitments of expenditure to follow laws and the budget. Article 13 and related provisions allow delegation to officials, creating the role of a Commitment of Expenditure Officer. Before making a commitment, that officer must send documents showing the content of the commitment to the Disbursing Officer and receive confirmation that it does not exceed the applicable budgetary amount, unless the same official holds both functions and performs the confirmation personally.

This structure is important for understanding public procurement and subsidies. A contract, grant, or other obligation may look commercially ordinary from the outside, but under the Act it must fit into a chain of budget execution. The later act of payment is handled separately by the Disbursing Officer, and the duties of expenditure and cash accounting are also separated, with only limited exceptions. The Act therefore treats "the government agreed to pay" and "the government paid" as different legal and accounting stages.

Government Contracts and Procurement Controls

The contract chapter is the part of the Accounting Act most frequently encountered by businesses dealing with national agencies. It sets the default rule that contracts such as sales, leases, and works contracts are to be put out to competition by public notice, while also allowing selective bidding and discretionary contracts in circumstances prescribed by Cabinet Order. The Act itself establishes the procurement architecture, and the detailed thresholds, procedures, and forms are supplied by subordinate rules.

The basic pattern is competitive procurement first. A Contract Officer or similar official must generally invite applications through public notice. Selective bidding is used where the nature or purpose of the contract makes full competition unnecessary or disadvantageous. Discretionary contracts are allowed where competition is impossible, urgent need prevents competition, or competition would be disadvantageous. Small-value contracts and other Cabinet Order cases may also move away from the default competitive route.

The Act also controls what happens after the procurement route is chosen. It provides for bid guarantees, the use of bidding rather than informal offers in ordinary competitive procedures, rules on selecting the successful bidder within the planned price limit, contract documents, contract guarantees, supervision of performance, and inspection of completed performance. For contractors, these provisions explain why a national government contract often involves procedural steps that do not appear in private-sector contracting. The Act's concern is not only price, but also budget discipline, fairness in selection, and verification that public money is paid for completed performance.

Treasury Funds, the Bank of Japan, and Cash Accountability

The Accounting Act also governs the custody and movement of treasury funds and securities. The Bank of Japan handles treasury receipt and payment affairs under Cabinet Order rules, and treasury funds accepted by the Bank of Japan are treated as deposits of the national government. The Act also provides that the Bank of Japan is subject to inspection by the Board of Audit for treasury funds, government bond proceeds, and securities handled for the national government.

The chapter on Cash Accounting Officials then turns from institutions to personal responsibility. A Cash Accounting Official is defined as an official responsible for receipt, payment, and custody of cash. If cash under that official's custody is lost and the official failed to exercise the care of a prudent manager, the official cannot avoid liability merely by saying that the work was not performed personally. The Act also provides notification and restitution procedures involving the Minister of Finance and the Board of Audit.

These provisions show why personal accountability under the Act extends beyond signing off on transactions. An official responsible for public cash cannot delegate away the duty of care, and the Act provides the Ministry of Finance and the Board of Audit with the tools to follow that accountability through.