Transition to the Accrual Accounting

Good Essays
Transition to the Accrual Accounting
The transforming from cash basis accounting to accrued accounting are associated with several general issue which including factor influencing the nature and speed of the transition, options in respect of the transition paths, and the management of the transition process.
The factors that may influence the nature and speed of the transition to accrual accounting which the system of government and the political environment are the major basic requirement. Beside that issue whether the reforms are focused solely on accounting change or whether they encompass other wider scale reforms also the key transition to the accrual accounting. Further the factor changes are being driven from the top down, or bottom up for example the changes driven by the top level of government may be mandatory for all entities within that government and may have fixed time frames can be also influence the nature and speed of the transition.
The current basis of accounting used by entity in Malaysia which the capability of existing information system and the completeness and accuracy of existing information particularly in relation to assets and liabilities are the key driver that cause an effect to reform the current cash basis accounting to the accrual accounting.
The application for the reform accrual accounting may apply to all public sector entities within a government. The transition to accrual accounting may be mandatory for certain types of entities, or it may be voluntary for some or all of them. The advantages of allowing entities to choose to adopt accrual accounting which the voluntary choice for the sector are that the individual entities are then motivated and committed to the reform process. However based on our research indicate that the voluntary transitions can cause difficulties in that the use of different bases of accounting by various entities within a government restraint the preparation of consolidated financial statement for

You May Also Find These Documents Helpful

  • Powerful Essays

    Accrual Accounting

    • 9967 Words
    • 40 Pages

    wynne@accaglobal.com tel: +44 207 396 5778 Abstract • IFAC Public Sector Committee issued their standard on the cash basis of accounting and the ASB (UK) issued its draft interpretation for public benefit entities (not-for-profit organisations) earlier this year. In each case the private sector model of accounts was followed closely. • What is the experience in the UK of producing full accrual based accounts for public sector organisations? Have the increased value of these accounts been realised in practice…

    • 9967 Words
    • 40 Pages
    Powerful Essays
  • Good Essays

    The lecture last night discussed accrual accounting concepts such as timing issues, and the basics of adjusting entries. The discussion went into more detail on periodicity assumption and how accounting divides the economic life of a business into artificial time periods. These time periods are generally a month, a quarter, or a year, now whether it is a fiscal year or a calendar year that is determined by the company itself. The lecture then reviews the revenue recognition principle which expects…

    • 335 Words
    • 2 Pages
    Good Essays
  • Satisfactory Essays

    Week Three CheckPoint: Accrual and Cash Accounting XACC/290 August 11, 2013 Week Three CheckPoint: Accrual and Cash Accounting Accrual and cash-based accounting offer two different styles of tracking the flow of money in a business. Each serves a purpose and to understand this idea one must first realize the how one varies from the other. Accrual-based accounting can be described as any transaction that changes a company’s financial statement is recorded in the accounting period the transaction…

    • 319 Words
    • 2 Pages
    Satisfactory Essays
  • Powerful Essays

    |ADJUSTMENT FOR ACCRUALS AND PREPAYMENTS | |Learning outcome | |Explain the foundations of accruals and prepayments, including the nature of the resulting change in the income statement. | |Show the entries for accruals and prepayments in the journal, ledger and final accounts.…

    • 1999 Words
    • 8 Pages
    Powerful Essays
  • Satisfactory Essays

    Accrual Accounting 2

    • 319 Words
    • 2 Pages

    Accrual Accounting: Income is recorded as you invoice customers, and expenses are recorded when you receive bills from vendors, regardless of when cash is actually exchanged. This presents a truer picture of income and expenses. Most companies use this method. Cash-Basis Accounting: Income is recorded when cash (checks, money orders, or currency) is received, and expenses are recorded when paid. However, unpaid credit sales and purchases do not show on ledgers, which can present a misleading…

    • 319 Words
    • 2 Pages
    Satisfactory Essays
  • Good Essays

    Cash account and accrual accounting are two separate methods that are similar in many aspects except when it comes to debits and credits. Cash accounting is also known to be called cash basis accounting. This approach allows for the recognition of income at the time it is received. That means that invoiced income is not counted as an asset until payment for the invoice has been received and vice versa for debits and expenses. Accrual accounting does not recognize any income until it is actually earned…

    • 276 Words
    • 2 Pages
    Good Essays
  • Good Essays

    ACCRUAL BASIS OF ACCOUNTING Accrual accounting records the effect of a business transaction as it occurs. When the business performs a service, makes a sale, or incurs an expense, the accountant records the transaction even if it receives or pays no cash. Net income from this activity equals the amount of cash received from customers minus the amount of cash paid for raw materials, labor, and the services of production facilities. If the entire operating cycle occurred in one accounting period…

    • 484 Words
    • 2 Pages
    Good Essays
  • Satisfactory Essays

    Accrual and Cash Accounting Beverly Clarkson September 19, 2014 XACC/290 Principles of Accounting Terri O’Neill-Martin Accrual and Cash Accounting These are two methods of keeping track of income and expenses in a business, (accrual and cash accounting). Accrual and cash accounting difference…

    • 322 Words
    • 2 Pages
    Satisfactory Essays
  • Good Essays

    Accrual Accounting Quiz

    • 4428 Words
    • 18 Pages

    Chapter 3 Modified Accrual Accounting: Including the Role of Fund Balances and Budgetary Authority True/False Questions 1. The term, Fund Balance, is used to indicate the residual net assets of a proprietary fund. Answer: False 2. Net resources of a governmental fund represented by currently due taxes receivable is an example of a nonspendable fund balance Answer: False 3. Net resources of a governmental fund represented by prepaid insurance is an example of a nonspendable fund…

    • 4428 Words
    • 18 Pages
    Good Essays
  • Satisfactory Essays

    simply repeating previous posts and agreeing. Discuss the pros and cons of accural accounting versus cash accounting methods. All discussion forums must require at a minimum: 1-Research (at least 2 citations) 2-Critical Thinking 3-Opportunity for dissent. Accrual Accounting versus Cash Accounting Ok, if we are to attain our career goals we need to understand these two methods of accounting. This topic is very important in almost any field that one chooses to fashion their…

    • 476 Words
    • 2 Pages
    Satisfactory Essays