Most of the developed countries that reformed their public sector management into a results-based system have had performance budgets in use for a number of years. A few developing countries are currently applying, on experimental basis, or exploring the potential use of Program and Performance Budget (PPB). This paper explains the relationship between reforming the government’s accounting system and wider budget system only at the conceptual level. Accordingly, the implementation of the accounting and budgeting reform requires the introduction of some significant changes in the public sector in the developing countries, which in turn creates the climate, fit for the reform process. The paper concludes by suggesting that accrual budgeting and accounting reforms on the lines of private sector accounting, the corner stone of which is Generally Accepted Accounting Principles (GAAP), will go a long way in achieving effectiveness of governmental activities at all levels.