Modified Accrual Accounting
Modified accrual accounting is a hybrid accounting method primarily used by governmental and non-profit entities, blending elements of cash and accrual accounting. It recognizes revenues when they become measurable and available for spending, and expenses when they are incurred, except for long-term assets and liabilities which are often handled on a cash basis. This approach aims to provide a clearer picture of financial resources and obligations for budgeting and reporting purposes in the public sector.
Developers should learn modified accrual accounting when working on financial software, ERP systems, or applications for government agencies, municipalities, or non-profits, as it's the standard for these sectors. Understanding this methodology helps in designing accurate accounting modules, ensuring compliance with regulations like GASB (Governmental Accounting Standards Board) standards, and supporting budgeting and financial reporting processes specific to public funds management.