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Accrual Accounting In Public Sector

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Cost management is known as a process that plan and control budget of any businesses made by an organization. It is also a form of management accounting that helps a business to predict the future expenditures and reduce chances of spending over the limit that has been planned in the budget. It is usually the most challenging tasks for officers whom are experts in accounting and finance because they have to think of the expenditures and benefits of it in a long-term period. Also, we can never predict the economy stability and circumstances. Moreover, it is challenging because having a good budget is known as an essential to any development of an organization whereby having drawbacks in planning a budget may be number one factor of why an organization …show more content…

This is because; it will report all assets and liabilities that were earned and incurred. Therefore, it help improvement in asset management. In using accrual accounting, it helps to identify the under-utilized assets and also disposed assets that were no longer in use in the organizations. Public sector organizations can thoroughly understand their financial resources, for example their assets and liabilities because the implications of accrual accounting provides detailed information compared to cash accounting. We can see that public sector organizations managed to improve their quality in gathering their information and easily make decision making related to asset acquisition. For example, in mid 1990s, Australia has managed to sell off their under-utilized assets when they implemented accrual accounting in their public sector. In result, they managed to generated millions of revenue from the assets …show more content…

Lastly, accrual basis of accounting also can indicate future profits for the public sector organizations even though the cash inflows have not yet occurred. This may lead to significant failing of the implementations or planning whereby will result in bankrupt regardless its level of profitability that has been reported. Accountants and finance officers have to pay attention to the statement of cash flows of business which indicates the flows of cash in and out of the

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