Modified Accrual Basis of accounting in SLG Accounting in FAR CPA(USA)
The modified accrual basis of accounting can be thought of as falling somewhere between the cash basis of accounting and the accrual basis of accounting. In other words, transactions are generally recognized when they occur (similar to the accrual basis of accounting), but the timing of the ultimate cash receipt or cash disbursement may have an impact on when the transaction is recorded (similar to the cash basis of accounting.)
Many of the differences between the modified accrual basis of accounting and the accrual basis of accounting concern the timing of when revenue is recognized. Under the modified accrual basis of accounting, revenues are recognized (i.e., recorded in the financial statements as revenue) when they are susceptible to accrual. To be susceptible to accrual, revenues need to be both measurable and available.
In determining whether revenues are measurable, the government does not have to know the exact amount of the revenue in order for it to be subject to accrual. As long as a reasonable estimate of the revenue can be made, this criterion will be met. The available criterion is a bit more complicated. Available means that the revenue is collectible within the current accounting period or soon enough thereafter to pay liabilities of the current period. This criterion results in the recording of only those revenues within a fiscal year that are received within a relatively short period of time after the close of the fiscal year.
