The paper 'Resource Management in Education and Public Sector" is an outstanding example of a finance and accounting assignment. There are fundamental differences between full accrual and modified accrual as bases of accounting. These differences in applying the accrual concept in the financial practices of public sector organisations are seen in the way the objectives of the accounting measurements are treated as well as the general accounting environment. Differences between the two systems are seen in the way different aspects are treated under them. These are outlined as follows. To begin with, the essence of accrual accounting is to record all the transactions in an enterprise which have a financial effect on the organisation in the periods in which they occur as opposed to the periods in which there is the transfer of cash, as is the case in the cash budget (Thai, 1992, p.
268). This is in contrast to modified accrual which refers to a modified system of accounting that has been adapted for practical and appropriate implementations of the accrual concept in public sector financial management practices.
The modified accrual system, which is a combination of both cash and accrual accounting bases, is in common use in all governmental funds accounting as well as reporting under the Generally Acceptable Accounting Procedures (Thai, 1992, p. 257). Another difference between the two accounting systems is seen in the way accounts payables are treated in the accounting books. Under the modified accrual system, such transactions are identified in the financial year in which they occur. This means that in a case where a government organisation is not under any applicable modification, accounts payables are recognized in the books of accounts in the same year that the organisation incurs them as a liability.
This is in contrast with what the case is under a full accrual system. In such a case, an organisation’ s items regarded as accounts payable are recognized and recorded in the accounting books in the financial year in which the organisation incurs them as a liability. This means that whereas there is the allowance of applicable modification in the treatment of accounts payable under modified the accrual accounting system, the full accrual accounting system does not provide for such modifications. Another difference between the two systems is demonstrated in the way prepaid items are treated in the accounting records.
When full accrual is used, prepaid items in the financial records are treated using the consumption method (Ruppel, 2009, p. 28). This means that items are recognized in the financial records the moment items are purchased, used or consumed by the organisation. This is different from what happens under the modified accrual system. Under the latter method, prepaid items are treated in two optional ways: using the consumption method or using the purchases method (United States Government Accountability Office, 2006, p.
14). In general, treating expenditures and prepaid items using the purchases method involves recognizing inventories and prepaid items as expenditures when they are purchased rather than being capitalized as assets. In general practice, the consumption method, in which inventories and prepaid items are recognized as assets and the recognition of the expenditure deferred until the period of consumption, is what is officially used in the public sector accounting.
Carlin, T. M. (2005). Debating the impact of accrual accounting and reporting in the public sector. Financial Accountability & Management, 21(3).
Department of Finance and Deregulation (2014). Agency resources and planned performance. Retrieved 7 March 2014, from http://www.finance.gov.au/publications/portfolio-budget-statements/13-14/docs/department-of-finance-and-deregulation.pdf
Gandevani, N. (2010). Winning edge trading: successful and profitable short and long term systems and strategies. Hoboken: John Wiley & Sons.
Khan, A. & Mayes, S. (2009). Transition to accrual accounting. Technical Notes and Papers, International Monetary Fund. Retrieved 7 March 2014, from https://www.imf.org/external/pubs/ft/tnm/2009/tnm0902.pdf
Ruppel. W. (2009). Governmental accounting made easy. Mason: John Wiley & Sons.
Thai, K., V. (1992). ‘Governmental accounting; an overview.’ In Rabin, J. (ed.), Handbook of public budgeting (pp. 241–274). New York: Marcel Dekker.
United States Government Accountability Office (2006). Understanding similarities and differences between accruals and cash deficits. Retrieved 8 March 2014, from http://www.gao.gov/new.items/d07117sp.pdf
Wanna, J., O'Faircheallough, C. & Weller, P. (1999). Public sector management in Australia. South Yarra: Macmillan.