Recent developments in governmental accounting show a shift from the traditional cash basis towards the accrual basis of accounting. New Zealand and Australia for example, have already adopted accrual accounting for the whole of government reporting. This study aims to describe governmental accounting and reporting in Malaysia; trace its development; identify the factors that play major roles in its development; and seek opinions on the current governmental accounting and reporting practices in Malaysia. The study also examined the variables identified in Lüder's contingency model and the impact these might be expected to have on developments in governmental accounting in Malaysia. The study contributes towards the knowledge and comparative research in governmental accounting by providing a description of governmental accounting in Malaysia and extending the application of Lüder's contingency model to the Malaysian government. The primary research on which this study is based was undertaken through three stages. The first stage consisted of archival research, which examined the practices and development of governmental accounting in Malaysia. The second stage was a questionnaire survey of 77 accountants in the federal and state governments aimed at obtaining opinions on issues related to the current development in accounting and reporting practices and the prospect for accrual accounting in the Malaysian government. The final stage was a series of interviews with senior officers in the Accountant General's Department, the National Audit Department, Treasury, government agencies and professional bodies to gain further insights and supplement the results of the questionnaire survey. Although the basis for governmental accounting in Malaysia is modified cash, accrual accounting was also adopted for internal purposes and for providing financial information required by international creditors. The respondents to the surveys indicated that the current reporting is sufficient for decision-making and accountability. The existence of financial crisis did not exert enough force to create a change in the government accounting system. The societal and administrative structural variables were unfavourable for innovation. The costs to implement a new system would be high, which include costs of training and new infrastructures.