cash basis accounting
Current status of public sector accounting in Malaysia- Cash Basis Accounting
Revenue is only recorded when the cash is actually exchanged for example, when revenue is received as cash and when expenses are actually paid. http://www.quora.com/What-are-the-differences-between-cash-basis-and-accrual-basis-accounting Why government used the cash basis of accounting?
Easy to learn and carry out and requires care but no special accounting skills.
Well-adapted to needs of budgetary control and payment is more ascertain.
Strict budget control can be exercised by comparing sums authorized with those actually spent
Easy to understand and verify
A statutory requirement in many countries
Arguments of accruals basis
Cash basis accounting does not work well for companies that have inventories and sell on credit. Accrual basis accurately reflects the company true financial position. Cash based only report revenue and expense when you receive and pay cash.
Cash accounting does not generate enough useful information for example payables and receivable.
Only accrual accounting provides adequate information on the full costs of operation, thus supporting decision-making for example Full cost information (including noncash costs such as depreciation, and accrued civil service pensions) is essential for assessing the efficiency of government services and thus is
Accrual basis generate reliable information on the full range of assets and liabilities.
Generate comprehensive financial information about the government. For example a loan which is written of has no impact on a cash based statement, but under accrual accounting it diminishes net worth.
Accrual Basic
Accrual basis accounting is a method of accounting in which all transactions are recorded on financial statements when the services they are related to occur. http://www.ehow.co.uk/about_5434122_define-accrual-accounting.html Example of country which successfully implemented accrual basic accounting
Revenue is only recorded when the cash is actually exchanged for example, when revenue is received as cash and when expenses are actually paid. http://www.quora.com/What-are-the-differences-between-cash-basis-and-accrual-basis-accounting Why government used the cash basis of accounting?
Easy to learn and carry out and requires care but no special accounting skills.
Well-adapted to needs of budgetary control and payment is more ascertain.
Strict budget control can be exercised by comparing sums authorized with those actually spent
Easy to understand and verify
A statutory requirement in many countries
Arguments of accruals basis
Cash basis accounting does not work well for companies that have inventories and sell on credit. Accrual basis accurately reflects the company true financial position. Cash based only report revenue and expense when you receive and pay cash.
Cash accounting does not generate enough useful information for example payables and receivable.
Only accrual accounting provides adequate information on the full costs of operation, thus supporting decision-making for example Full cost information (including noncash costs such as depreciation, and accrued civil service pensions) is essential for assessing the efficiency of government services and thus is
Accrual basis generate reliable information on the full range of assets and liabilities.
Generate comprehensive financial information about the government. For example a loan which is written of has no impact on a cash based statement, but under accrual accounting it diminishes net worth.
Accrual Basic
Accrual basis accounting is a method of accounting in which all transactions are recorded on financial statements when the services they are related to occur. http://www.ehow.co.uk/about_5434122_define-accrual-accounting.html Example of country which successfully implemented accrual basic accounting