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The Importance Of Accrual Accounting

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Accruals are the balance sheet in liabilities and non cash based assets used for accrual accounting. Accounts including goodwill, accounts payable, accounts receivable, interest expense and tax liability. The amount in accounting statement will have great increase in using accrual accounts and cash transactions been recorded only. Company knows the cash revenue that supposes to receive by using accruals. However, cash transactions do not provide information for business activities such as revenue based on credit.

The importance of accruals is better cost management and budgeting. The financial statements will be more accurate reflect to company’s liabilities. There will be a reduction of unexpected charge to business units.

The Government …show more content…

There are a few benefits of this new shift, among them is that it would empower the Government to disclose its cash flow and financial position more precise, in order to enrich the accountability and transparency in managing its fiscal events. The transparency and higher accountability could be achieved by having a more complete and accurate information on the consumption of resources that the nation have as well as a better recording of the liabilities and obligations (Gomez, …show more content…

From cash accounting to accrual accounting, the most significant costs would be incurred in relation to staff training and recruitment of staff with relevant technical knowledge. Based on the journal it’s stated that the decision incompliance with IPSAS is only possible if significant costs are incurred in recruiting and training the staffs with the appropriate level of knowledge and skills in IPSASs standards. For example, the company staffs are required to train themselves with the up-to-date knowledge of the new system. For the Information Technology (IT) department, it is required all the systems to be upgraded or put in place in order to support the changes of the IT software. In order to secure these resources and promote buy in materials, senior management and politicians is essential for it. The reason is because accrual accounting is complex than cash accounting. These complexities of consolidation process required longer time to consolidated financial statements are either for the developing and under-developed countries. Nevertheless, professional judgment should be elevated since it could influence non-accounting staff in the field of decision making. In cash accounting method, it is required to making judgment in both assets and expenses yet for the cash accounting, the judgment only involved expenses. On the other hand, it requires the staff to have knowledge of new system before it can function well. Technical accounting

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