Why do you think accrual basis accounting is Analysis preferable to cash basis accounting
in evaluating a business's operating results?
Whoever warned against counting chickens before they've hatched was clearly a proponent of cash basis accounting
. The method, often referred to as "checkbook accounting," is so simple it hardly requires explanation.
The Government now proposes to phase out cash basis accounting
in 1999/2000 - a year later than originally announced - and has extended the three-year "catch up" period to ten years.
Justification for adopting cash basis accounting
for OPEB was based on assumptions that the number of retirees covered was relatively small, the costs were insignificant and the continuation of benefits was discretionary.
Categories: Financial Management, Accounting procedures, Accounting standards, Appropriations, Audit reports, Cash basis accounting
, Federal regulations, Financial analysis, Financial management, Financial statement audits, Financial statements, Independent counsels, Internal controls, Reporting requirements
The ED includes a dual-reporting perspective with two sets of financial statements; one at the entity-wide level that follows the flow of economic resources method using full accrual basis, and another at the fund level that follows the flow of financial resources method using modified accrual and cash basis accounting
. Other major proposed changes in the ED include the reporting and depreciation of all capital assets, including infrastructure, at the entity-wide level and the requirement of supplementary information in a section called Management's Discussion and Analysis (MD&A).
It is too easy for the seller to manipulate cash basis accounting
- by not paying bills, for example - to the buyer's disadvantage.