Modified Accrual Accounting

AAA

DEFINITION of 'Modified Accrual Accounting'

An accounting method commonly used by government agencies that combines accrual-basis accounting with cash-basis accounting. Modified accrual accounting recognizes revenues when they become available and measurable and, with a few exceptions, recognizes expenditures when liabilities are incurred. This system divides available funds into separate entities within the organization to ensure that the money is being spent where it was intended.

INVESTOPEDIA EXPLAINS 'Modified Accrual Accounting'

The Government Accounting Standards Board, which is recognized as the official source of generally accepted accounting principles (GAAP) for state and local governments, establishes modified accrual accounting standards. To distinguish government accounting from business accounting, modified accrual accounting uses some different terminology than other accounting methods. For example, it uses the terms "excess" or "deficiency" instead of "net income", and "expenditures" instead of "expenses". The idea that government agencies need a different type of accounting system is accepted because the purpose of government organizations is significantly different from the purpose of both for-profit businesses as well as not-for-profit non-governmental organizations.

RELATED TERMS
  1. Dollar-Value LIFO

    An accounting method used for inventory that follows the last ...
  2. Nonaccrual Experience Method - ...

    An accounting procedure allowed by the Internal Revenue Code ...
  3. Accounting

    The systematic and comprehensive recording of financial transactions ...
  4. Accounting Method

    The method by which income and expenses are reported for taxation ...
  5. Accrual Accounting

    An accounting method that measures the performance and position ...
  6. Asset

    1. A resource with economic value that an individual, corporation ...
Related Articles
  1. Uncommon Jobs For Your Finance Degree
    Professionals

    Uncommon Jobs For Your Finance Degree

  2. Social Finance Careers: Creating A Better ...
    Entrepreneurship

    Social Finance Careers: Creating A Better ...

  3. Navigating Government And Nonprofit ...
    Retirement

    Navigating Government And Nonprofit ...

  4. Financial History: The Rise Of Modern ...
    Professionals

    Financial History: The Rise Of Modern ...

Hot Definitions
  1. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  2. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  3. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  4. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  5. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  6. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
Trading Center