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Modified Accrual Accounting
chisha ntungo, Member
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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Modified Accrual Accounting & International Accounting Standards (IAS)Pratt I think an accountant in any organization, whether it is a government agency, for profit or not-for-profit organization, must follow accounting standards and Generally Accepted Accounting Principles (GAAPs).
Where exceptions are prevalent, International Financial Reporting Interpretation Committee (IFRIC) must be consulted to update principle/standards in recording that type of transaction or event should it occur again.
Modified Accrual Accounting is good, as long as the central audience is identified and the focus is not waving. That is to say, if stakeholders are deliberating along profitability lines; then accrual-based accounting is said to be most appropriate to use, therefore all concerned must unanimously focus on profitability: if an administrator (who usually has a "first-hand" view of what is happening on the ground right now) has any divergent view it must be communicated to all so that expense issues showing through cash basis accounting frameworks can be better resolved. |
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