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Unformatted text preview: 2010-09-15 Accruals Question.doc I work for a governmental agency that uses what I have heard is called "modified" accrual accounting. Could you explain what would make it modified? Also, when we carry over expenses from one year to the next we "accrue" them we do not call them "Accounts Payable"? When we expect to get funding from a grantor after the grant work has been completed or for expected tax revenue, we usually refer to that as "Accrued Revenue" not "Accounts Receivable". Is the "accrual" the act of recording the account payable or the account receivable?... I am getting a little confused with the terminology between the book and my work. Government accounting uses "modified accrual" which is very simular to "regular" accrual with some noted exceptions. I don't know all the exceptions (because I have NEVER done government accounting) however, modified accrual still recognizes revenues when earned and expenses when incurred, however without a for-profit motive, i.e. an desire for Net Income, there is no need to accrue earned revenues. My understanding is government accounting is managing to a "surplus" or "deficit". The important point is modifiied accrual will still recognize revenues and expenses as regular accural it is NOT cash-basis accounting. The terminology from your job is probably correct but different; however, the concepts are the same. In for-profit GAAP accounting we do not have to the concept of "funding from a grantor" remember in GAAP for something to be recorded in the books it must be an ECONOMIC EVENT "expected funding" is NOT an economic event. Now when you mention the work has been completed, then in GAAP accounting usually no work is completed without a contract in place, so that would lead to accrued revenues and an Account Receivable. Hope this helps, Ira September 28, 2010 //home/vdimitrov/25409/7ef6a182969d2635da6cd5e3e27a50e7c22956fc.doc ...
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