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Public accounting systems differ among countries so the reform towards harmonization is needed especially for EU Member Countries. The transition from cash-based to accrual-based accounting is necessary in order to provide the wide scope of relevant information to the internal and external users. The objectives of the paper are: to examine the level of conversance with IPSAS (International Public Sector Accounting Standards) among public sector accountants in Croatia, to outline the potential benefits and improvements of accrual principle application, and to determine the implication of increased effectiveness and efficiency of the administrations' actions on greater transparency of financial statements. Empirical research is based on survey addressed to the accountants employed by local government. The findings suggest that accrual principle application in Croatian public sector accounting would lead to the increase of effectiveness and efficiency of the public sector and eventually to the higher level of transparency.