A Treasury proposal to fine-tune bookkeeping practices on sales of government securities will provide additional safeguards against abuses by unscrupulous dealers, a department official said yesterday.

John J. Niehenke, acting assistant secretary of the Treasury, told a House Banking panel that expansion of the book-entry system would be a cost-effective means of increasing investor confidence in the market.

Niehenke said that beginning in July 1986, new issues of Treasury securities would be available only in book-entry form, and no investor would be permitted to hold the physical paper.

Federal Reserve Board Chairman Paul A. Volcker testified that any new regulation on government securities should include all dealers and not exclude banks, as recommended by some of the proposed legislation being considered by the subcommittee on domestic monetary policy.

Volcker said he prefers that Congress create a single self-governing body to write basic regulations for dealers in government securities, with oversight and veto power vested in the Federal Reserve and other federal agencies involved in the securities market.

Niehenke said there is no need to adopt what he called "excessive protection" of government securities trading. He said the cost of such unneeded regulation would be passed on to all taxpayers.