| Description |
Cash-basis accounting, the antecedent of the increasingly popular accrual-basis model of accounting, recognizes economic events in financial statements when the cash inflows or outflows associated with those transactions occur. This framework is intuitive and straightforward to apply, as each transaction is recorded when cash is received or disbursed. Even so, in the United States, the use of accrual-basis accounting is required for many reporting entities. Accrual-basis accounting reflects the economics of an entity more accurately by capturing economic events in the period during which they occur, regardless of when cash is exchanged. Nonetheless, cash-basis and modified cash-basis accounting remain useful frameworks in the public sector. In this thesis, I examine the rationale for and against the use of cash-basis accounting by state and local government agencies. In addition, I discuss the future of financial accounting in the public sector, with particular attention paid to whether these governmental agencies are expected to adopt full accrual-basis accounting. |
