Modified Accrual Accounting
Current Financial Resources Focus
Governmental funds use modified accrual accounting, which recognizes revenues when they are both measurable and available. Expenditures are generally recognized when liabilities are incurred, with certain exceptions.
- Revenue must be measurable.
- Revenue must be available.
- Focuses on short-term financial resources.
- Capital assets are not reported in governmental funds.
Note
Modified accrual accounting is unique to governmental funds and is frequently tested on the CPA FAR exam.
Summary
Modified accrual emphasizes current financial resources rather than long-term economic resources.