The paper 'Full-Accrual Accounting Systems, Modified Accrual Accounting and Cash Budget" is an outstanding example of finance and accounting coursework. The entire paper is divided into three main portions; the initial part describes the difference between the full-accrual-modified accrual and cash budget, the next section includes the issues of transparency and the last section describes the two major accounting tools and techniques mainly used all over the world. What is the difference between Full-accrual accounting systems, modified accrual accounting and a cash budget? Full-accrual accounting system This is an accounting system in which the financial accounts are recorded on economic activity rather a financial activity.
Under this system, the revenues are recorded when they are actually realized and earned rather when the payments are actually received. The expenses are matched with their revenues rather when they are paid. This full accrual accounting system actually belongs to the matching principle of the accounting in which the expenses are matched and recorded with their revenues regardless when they are paid. This accrual accounting system is according to the US GAAP (generally accepted accounting principles). This system is specially used for the profit income measurement as in this accounting system the matching of expenses with the revenues is very important.
The major aim of the model is to elaborate the total cost that occurs in the firm and matching this exactly with revenue of that period. This includes Employment cost (recruitment cost, additional production cost, and education cost), Operating cost (Wages and Overheads), Work environment cost (cost of absence, sickness benefits, rehabilitation cost and disability pension cost). It also includes the cost of labour per hour, the cost occurs on the injuries and number of absenteeism.
The aim of the model is to optimize the total cost that occurs on labour during its lifetime period. The cash flow statement for the accrual accounting system is very essential. Modified accrual system Modified accrual system clearly shows the number of funds that are available for the firm. This accounting system can not define profit determination but actually defines how much fund is available for the firm. Under this system, the word expenditures are used instead of expenses. The modified accrual system does not elaborate that how much he firm earns a profit rather it informs that how much amount the firm hold for its further funding system.
In this system, the organization accounting activities are divided into separate funds that are also viewed as a separate entity. Cash Budget Cash budget informs the firms how much cash inflow in the firm and how much the cash outflow from the firm. The cash budget informs that either the firm has enough cash for its future transaction or not. Cash budget informs the total budget of the firm and includes different tools and techniques.
The cash budget budgeted income statement and cash flow statement. It does not relate the expenses and revenues rather involve total expenses and revenues to inform the total cash in hand of the firm. An example of cash budgeted income statement is given that will provide a clear sense of the cash budget.
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