A. What is the difference between accrual-basis accounting and cash-basis accounting?
The difference between the two types of accounting is when revenues and expenses are recorded. In cash basis accounting revenues are recorded when cash is actually received and expenses are recorded when the expenses are actually paid. B. Why would politicians prefer the cash basis over the accrual basis?
The accrual basis system deals with deprecation of the value of equipment, land and such. Politicians would sooner see that cash value stay the same the whole time. This way politician can tax at a higher rate. If in fact, the full money value can be deprecated, it also makes a business worth less in the long run. In whole, a cash basis accounting system works great for the government. It is easy to calculate as well as tax to the full extent as no write offs can be had. C. Write a letter to your senator explaining why the federal government should adopt the accrual basis of accounting.
This letter is to present the case that the federal government should adapt the accrual basis of accounting.
The benefits of accrual accounting are:
Better measurement of costs and revenues, including comparisons between years. b.
Greater focus on outputs rather than inputs.
More efficient and effective use of resources, through charges for fixed assets. d.
Full cost of providing a service can be compared with outside suppliers. e.
A better indication of the sustainability of government policy. f.
Better financial management.
Greater comparability of management performance results.
Accrual accounting is not an end in itself, but rather, a means of shifting the emphasis of the budgetary process away from cash inputs, towards outputs and outcomes, in the hope that this will result in greater management efficiencies, and hence, better outcomes for governments and the communities they serve.
To make this statement stronger the...
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