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. Accrual Accounting

    An accounting method that measures the performance and position ...
  4. Finance

    The science that describes the management, creation and study ...
  5. General Ledger

    A company's main accounting records. A general ledger is a complete ...
  6. Asset

    1. A resource with economic value that an individual, corporation ...
RELATED FAQS
  1. How is accounting in the United States different from international accounting?

    Despite major efforts by the Financial Accounting Standards Board, or FASB, and the International Accounting Standards Board, ... Read Full Answer >>
  2. What is the variance/covariance matrix or parametric method in Value at Risk (VaR)?

    The parametric method, also known as the variance-covariance method, is a risk management technique for calculating the value ... Read Full Answer >>
  3. How are transfer prices set?

    The United States, like most nations, does not want to allow transfer pricing methods that reduce the amount of taxes the ... Read Full Answer >>
  4. What is backtesting in Value at Risk (VaR)?

    The value at risk is a statistical risk management technique that monitors and quantifies the risk level associated with ... Read Full Answer >>
  5. How do I discount Free Cash Flow to the Firm (FCFF)?

    Discounted free cash flow for the firm (FCFF) should be equal to all of the cash inflows and outflows, adjusted to present ... Read Full Answer >>
  6. What's the difference between a confidence level and a confidence interval in Value ...

    The value at risk (VaR) uses both the confidence level and confidence interval. A risk manager uses the VaR to monitor and ... Read Full Answer >>
Related Articles
  1. Professionals

    Uncommon Jobs For Your Finance Degree

    Not everyone can land the glamour jobs, but the world of finance has a lot more to offer. Here are some uncommon jobs in finance that you might want to consider.
  2. Entrepreneurship

    Social Finance Careers: Creating A Better World

    A financial career can be used to do more than just bring in profits. Find out how to get a career with a more social objective.
  3. Retirement

    Navigating Government And Nonprofit Financial Statements

    Learn how to trace where your tax dollars and charitable donations are going.
  4. Professionals

    Financial History: The Rise Of Modern Accounting

    Find out how these two have grown hand-in-hand throughout our modern history.
  5. Economics

    Understanding Carrying Value

    Carrying value is the value of an asset as listed on a company’s balance sheet. Carrying value is the same as book value.
  6. Economics

    International Financial Reporting Standards (IFRS)

    International Financial Reporting Standards are accounting rules and guidelines governing the reporting of different types of accounting transactions.
  7. Economics

    Explaining Property, Plant and Equipment

    Property, plant and equipment are company assets that are vital to business operations, but not easily liquidated.
  8. Economics

    How to Calculate Trailing 12 Months Income

    Trailing 12 months refers to the most recently completed one-year period of a company’s financial performance.
  9. Economics

    What is Unearned Revenue?

    Unearned revenue can be thought of as a "pre-payment" for goods or services which a person or company is expected to produce to the purchaser.
  10. Economics

    What is a Capital Lease?

    A lease considered to have the economic characteristics of asset ownership.

You May Also Like

Hot Definitions
  1. Fixed-Income Arbitrage

    An investment strategy that attempts to profit from arbitrage opportunities in interest rate securities. When using a fixed-income ...
  2. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  3. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  4. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
  5. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. The amount of unsystematic risk can be reduced through ...
  6. Security Market Line - SML

    A line that graphs the systematic, or market, risk versus return of the whole market at a certain time and shows all risky ...
Trading Center