Accrual and Modified Accrual Basis of Accounting - Essay Example

Accrual and Modified Accrual Basis of Accounting Question Accrual Accounting Basis Accrual accounting, also known as full accrual accounting, emphasizes the recording of the financial effects on an organization such as transactions and other events and situations that possess cash consequences for a firm in the same periods of occurrence. For instance, such dealings, events, and situations manifest are recorded not only during the periods in which cash is received or paid by the business (Ruppel, 2013).

The accrual accounting emphasizes recording and allocating revenues and expenses in the financial periods when received and paid respectively (Smith, 2009). It recognizes noncash business engagements that include accruals, deferrals, and amortizations. Modified Accrual Accounting This accounting basis recognizes expenditures rather than expenses (Ruppel, 2013). It recognizes revenues during the periods in which they are prone to accrual that implies their measurability and availability. Modified accrual accounting requires that incurred expenditures be recognized in the period in which their related transactions occurred (Ruppel, 2010).

On the other hand, revenues are only available if they can be collectible within the current period (Wiley Cpa Exam Review 2013, Financial Accounting and Reporting, 2012). Once cash has been spent, the expenditures become measurable thereafter.Question 2 (i) A comprehensive annual financial report has three sections: the introductory segment, financial section and the section with statistical data (Ruppel, 2010). The introductory section entails the transmittal letter, while the financial section comprises a number of aspects that include the independent auditor’s report, schedules, financial statements, notes regarding financial statements, management views and analysis and the required supplementary information (Ruppel, 2010).

The statistical section entails additional information relating to finances, economy, and demography.Question 2 (ii) CAFR envisages external funding so that the stakeholders may have some knowledge on the debt levels of the firm and enhance comparison of the performance of the firm (Ruppel, 2010).ReferencesWiley Cpa Exam Review 2013, Financial Accounting and Reporting. (2012). John Wiley & Sons Inc.Ruppel, W. (2013). Wiley GAAP for Governments 2013: Interpretation and Application of Generally Accepted Accounting Principles for State and Local Governments. Wiley.Smith, G. S. (2009).

Accounting for libraries and other not-for-profit organizations. Chicago [u.a.: American Library Association.Ruppel, W. (2010). Governmental accounting made easy. Hoboken, N.J: Wiley.