What is the primary purpose of manual accounting in the context of municipal finance?

The primary purpose of manual accounting in the context of municipal finance is to reestablish the budget after fiscal year closure. Manual accounting involves detailed record-keeping and the careful tracking of financial transactions. This ensures that all financial activities have been accounted for and enables municipalities to assess their fiscal position at the end of a fiscal year.

Reestablishing the budget is critical because it allows municipalities to review actual expenditures against the planned budget. This process highlights variances, identifies areas of overspending or underspending, and provides insights necessary for making informed financial decisions in future budgeting cycles. By using manual accounting, officials can ensure accuracy and comprehensiveness, which is vital for transparent governance and effective financial management.

In contrast, manual accounting does not eliminate the need for budget preparation—budgets are an integral part of financial planning. While it may assist in managing various projects and could contribute to grant reporting, these functions are secondary to its primary goal of ensuring the financial records align with the budget during the fiscal year closure.