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Date: 2019-07-16 Page is: DBtxt001.php list0300-Cash-basis-accounting-1

Definitions for TrueValueMetrics
Cash Basis Accounting

Accounting ... double entry accounting is very powerful and serves to provide a way to control and account for assets entrusted to operating managers. Cash basis accounting that is used widely in government and the public sector has none of the logical structure that serves to make double entry accrual accounting so robust.

Cash based accounting is common in government organizations. The US uses a cash based system. These systems have become intertwined with budget procedures ... have become increasingly complex and legalistic and increasingly seem to be inadequate to control funds and achieve any reasonable level of accountability for anything. Cash based accounting in government is one of the weakest aspects of modern governance and makes a mockery of responsible financial management ... which is almost certainly the big reason why it has remained the favored system of accounting in government.

Cash basis for government accounting!

The principles associated with accrual accounting are clear, but most government and public sector accountancy (such as the United States) use cash basis accounting. The statutory authorities and regulators have seen fit to suspend the accrual principles and allow important assets and liabilities not to be recorded in the balance sheet accounts.

Some countries have moved away from cash based systems in order to get better control of the financial management of government ... notably New Zealand, Australia and the UK. The move from cash based to more accrual based accounting is a substantial change with the potential for much confusion.

Community accounting can learn from the large scale government accounting experience ... and have an easier time simply because the scale is more manageable.

See also Accrual Basis Accounting



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