According to recent research, about 50 per cent of governments will have transitioned to reporting on an accrual basis by 2025.
Countries such as Australia, New Zealand, the UK, France and Canada have been reporting purely on an accrual basis since the 1990s, and the momentum for adoption of accural accounting has been building steadily.
The push is being driven by more calls for transparency from governments around budgeting and spending.
At the most fundamental level, the difference between cash and accrual accounting is when revenue and expenses are recognised in the financial accounts.
Cash accounting books revenue at the time it is received and as an expense when money is paid out. As such, revenue earned in one financial year may end up being reported in the next financial year’s accounts. The same goes for expenses.
Accrual accounting books revenue when it is actually earned and as an expense when it is incurred. In other words, revenue and expenses are booked in real time rather than deferred.
As such, accrual accounting effectively produces a clearer and more accurate picture of an organisation’s financial position at any point in time. This increased transparency is particularly important for the public sector.
အခြေခံအကျဆုံးအဆင့်တွင်၊ ငွေသားနှင့် acrual accounting အကြားခြားနားချက်မှာ ဝင်ငွေနှင့် အသုံးစရိတ်များကို ဘဏ္ဍာရေးအကောင့်များတွင် အသိအမှတ်ပြုသည့်အချိန်အခါဖြစ်သည်။
Cash accounting သည် ငွေသား လက်ခံရရှိသည့်အချိန်တွင် ဝင်ငွေ အဖြစ်အသိအမှတ် ပြုပြီး ငွေထုတ်ပေးသည့် အခါ အသုံးစရိတ်အဖြစ် အဖြစ်အသိအမှတ် ပြုသည်။ ထို့ကြောင့် ဒီဘဏ္ဍာရေးနှစ်တွင် ရှာလို.ရရှိသော ဝင်ငွေသည် လာမည့်ဘဏ္ဍာရေးနှစ်၏ အကောင့်များတွင် အစီရင်ခံခြင်းများဖြစ်လာ နှိင်သည် ငွေကိုနောက် ဘဏ္ဍနှစ်မှာ ရသည်.အတွက်။ အသုံးစရိတ်လည်း အတူတူပါပဲ။
Accrual accounting သည် ငွေစာရင်းစာအုပ်များ အမှန်တကယ် ဝင်ငွေကိုရှာလိုက်တဲ. အချိန် (ဥပမာ ရက် ၃၀ ကျမှာ ငွေးရှင်းရတယ် ဆိုပါဆို. ဘောပင် တွေကို ၀ယ်သူထံ ပို.ပေးလိုက်ပြီ၊ ဒါပေမဲ. ၀ယ်သူ က ရက် ၃၀ ကျမှာ ငွေးရှင်းရတယ် ဆိုပါဆို. သဘောတူညီမှု အရ၊ ဒါဆိုရင် Accrual accounting အရ ပိုက်ဆံ မရ သေးပေမဲ. ဘောပင် တွေကို ၀ယ်သူထံ ပို.ပေးလိုက်ပြီ ဖြစ်တဲ.အတွက် ချက်ချင်း ဝင်ငွေ အဖြစ်အသိအမှတ် ပြု ပါတယ်၊ ၀ယ်သူ ကလဲ ပိုက်ဆံ ချက်ချင်းပေးစရာ မလိုပေမဲ့လည်း ပေးရန်ရှိတဲ. အဆုံးစရိတ်အဖြစ် စာရင်းသွင်းပါတယ်၊ ၎င်းကိုရရှိသည့်အခါ ကုန်ကျစရိတ်အဖြစ် တစ်နည်းဆိုရသော် ဝင်ငွေနှင့် ကုန်ကျစရိတ်များကို အချိန်နှင့်တပြေးညီ ရွှေ့ဆိုင်းခြင်းထက် အချိန်နှင့်တစ်ပြေးညီ ကြိုတင်စာရင်းပေးပါသည်။
ထို့ကြောင့်၊ စုဆောင်းငွေစာရင်းကိုင်ခြင်းသည် Accrual accounting သည် အဖွဲ့အစည်းတစ်ခု၏ဘဏ္ဍာရေးဆိုင်ရာအနေအထားကို အချိန်နှင့်တစ်ပြေးညီ ပိုမိုရှင်းလင်းပြတ်သားစွာ တိကျစွာပုံဖော်ပေးပါသည်။ ပွင့်လင်းမြင်သာမှု တိုးလာခြင်းသည် ပြည်သူ့ကဏ္ဍအတွက် အထူးအရေးကြီးပါသည်။
The biggest challenge in implementing accrual accounting in Malaysia to date has been the amendment of legislation and rules pertaining to the financial reporting and accounting system, such as the Financial Procedures Act 1957 and other relevant acts.
“This step is important and necessary, as the current Financial Procedures Act 1957 requires a cash-based financial statement to be presented to parliament,” he says.
Revenue Case Study:
On January 1, a charity signs a three-month contract with a donor which confirms a monthly donation of $50. The charity’s financial reporting period is 1 Jan to 31 Dec.
Under the cash method, the amount is not recorded until the $50 is received in the charity’s bank account.
Under the accrual method, the $50 is recorded in advance of receiving the cash. Assuming that the donation is received on the 21st of each month:
Cash Method | ||
| Journal entry 21 Jan | Journal entry 21 Feb | Journal entry 21 Mar |
| Dr Bank $50 | Dr Bank $50 | Dr Bank $50 |
| Cr Revenue $50 | Cr Revenue $50 | Cr Revenue $50 |
Accrual Method | ||
Journal entry 1 Jan (initial entry) | ||
| Dr Receivable $150 | ||
| Cr Revenue $150 | ||
| Journal entry 21 Jan | Journal entry 21 Feb | Journal entry 21 Mar |
| Dr Bank $50 | Dr Bank $50 | Dr Bank $50 |
| Cr Receivable $50 | Cr Receivable $50 | Cr Receivable $50 |
By raising a receivable a charity is able to keep a track of the money a donor owes or has paid them through the books. Under the cash method, there is a chance a donor never pays the charity, perhaps through an administrative error and the money could never be received by a charity.
Expense Case Study:
For the last 12 months a charity has been paying $1,000 a month in rent.
The landlord normally increases the charity’s rent by 2% per annum from 1 December each year. However, the landlord tells the charity that if it pays the rent 12 months in advance, she will not increase the rent for that period.
The charity decides to accept the offer, and pays $12,000 to the landlord on 1 December 2017. The charity’s reporting period is 1 January to 31 December.
Cash Method | Accrual Method | |||
| Journal entry 1 Dec | Journal entry 1 Dec | |||
| Dr Rent | $12,000 | Dr Rent | $1000 | |
| Cr Bank | $12,000 | Cr Bank | $12,000 | |
| Dr Prepaid Rent: | $11,000 | |||
If you consider the end of year report for this charity the rent expense would be recorded as follows: | ||||
Cash Method | Accrual Method | |||
| Reporting period (year) | 20XX | 20XX | ||
| Rent Expense | $23,0001 | $12,0002 | ||
1 From January 1 to November 30, the charity paid the landlord $1000 a month in rent (11 x $1000 = $11,000). On December 1, the charity paid another $12,000 in rent. Therefore the total is $11,000 + $12,000 = $23,000.
2 From January 1 to November 30, the charity paid the landlord $1000 a month in rent (11 x $1000 = $11,000). On December 1, the charity paid another $12,000 in rent. Under the accrual method only the amount that relates to December is recognised ($1000) and the remainder is recorded in a pre-payment account as an asset in the balance sheet ($11,000). Therefore the total is $11,000 + $1000 = $12,000.
Tips on cash accounting
- Consider treating debit card transactions as cash
- Keep a list of all assets (including long term assets) – for example, keep an asset register using a spreadsheet
- Keep sufficient financial and operational records so your charity can prepare true and fair financial statements and be audited if required
- To support planning, consider preparing a cash flow budget. This should include future expected one-off or large payments, such as rates or insurance premiums
- Where valuations were used to determine the value of assets and liabilities, make sure they are relevant and reliable and include sufficient records to show how the amounts were determined.
