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Accrual and cash basis accounting.

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On numerous occasions, proposals have surfaced to put the federal government on the accrual basis of accounting. This is no small issue. If this basis were used, it would mean that billions in unrecorded liabilities would have to be booked, and the federal deficit would increase substantially.

(a) What is the difference between accrual-basis accounting and cash-basis accounting?
(b) Why would politicians prefer the cash basis over the accrual basis?

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Solution Summary

This assignment discusses the differences in accrual and cash basis accounting and why politicians prefer cash basis.

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(a) What is the difference between accrual-basis accounting and cash-basis accounting?

The difference between accrual basis accounting and cash basis accounting is when revenue and expenses are recorded. In accrual basis accounting income is reported in the fiscal ...

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