Modified Accrual Accounting

Modified Accrual Accounting

What does modified accrual accounting mean? This is an accounting method commonly used by government agencies that combines accrual-based accounting with cash-basis accounting.
Modified accrual accounting recognises revenues when they become available and measurable and, with a few exceptions, recognises expenditures when liabilities are incurred.
This system divides available funds into separate entities within the organisation to ensure that the money is being spent where it was intended.
To distinguish government accounting from business accounting, it uses some different terminology than other accounting methods. For example, it uses the terms "excess" instead of "net income", and "expenditures" instead of "expenses".
The idea that government agencies need a different type of accounting system is accepted because the purpose of government organizations is significantly different from the purpose of both for-profit businesses as well as not-for-profit non-governmental organisations.

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