Preview

Accrual vs Cash Accounting Basis

Powerful Essays
Open Document
Open Document
5041 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
Accrual vs Cash Accounting Basis
Public Sector Accounting System in Nigeria: A Comparative Study of Cash-Basis and Accrual-Basis of Reporting

By

Cletus .O. Akenbor (Ph.D)
Faculty of Management
University of Port Harcourt, Choba
Rivers State, Nigeria
E-Mail: akenborcletus@yahoo.com Tel:+2348033364528

And

Tennyson Oghoghomeh
Director – Finance and Accounts
Office of the Deputy Governor of Delta State
Asaba, Nigeria oghoghomehtennyson@yahoo.com Tel: +2348035537037

ABSTRACT

The objective of this study is to investigate the accounting system that should be adopted in the Nigerian public sector for achieving the financial, public and growth objectives of the government. To achieve this purpose, research questions were raised, hypotheses were formulated and a critical review of extant literature was made. The population of the study consists of eighteen(18) state legislators and thirty-nine(39) Directors of Finance and Accounts of the chosen ministries and extra-ministerial departments. In order to generate the necessary data for this study, the survey method of research design was adopted in which a well structured questionnaire designed in five-point Likert-Scale was administered on the study population. The data generated for this study were analysed using mean scores while the stated hypotheses were statistically tested with Z-test. The findings generated from this study indicated that cash basis of accounting does not significantly promote effective financial reporting of public sector entities in Nigeria, since the z-test result shows that the computer z-value (1.0) is less than the critical z-value (1.96). Similarly, it was gathered in this study that accrual basis of accounting significantly promotes effective financial reporting of public sector entitles in Nigeria. In view of the above findings we recommended the adoption of accrual basis of accounting in public sector entitles in Nigeria.

Key words; Cash accounting, accrual


References: Adebayo, J (2010) “Accrual Accounting – Does it meet Government Financial Reporting Objective”? International Journal of Public Finance and Economic Development; 13(4); 126-134 Appollos, D (2001) Public Sector Financial Reporting; Fortune Press; Enugu De Volkskrant, W.K (1994) “Can Public Sector Abandon Cash Accounting?” International Journal of Development Studies in Arab World; 7(2); 18-20 Eagleton, T (2009) “Public Sector Financial Controls”; Researches in Public Finance; 13(2); 79-86 Hajik, G and Kpamala, J (1998) Public Sector Accounting and Financial Management; New Delhi; Vikas Publishers Hongs, M (2004) Public Financial Management and Accounting; New Jersey; Prentice Hall Inc. Obazee, J (2011) “Moving from Cash to Accrual Basis of Accounting – The Transition Path; Workshop on Accounting and Financial Reporting in the Public Sector; Held at Ibadan, Nigeria Okoye, E.I and Oghoghomeh, T Omenika, H (2008) Advanced Public Financial Management; New York; Free Press Ozugbo, M.J (2009) “Financial Reporting for Good Governance in Public Sector Entities”; in Nedaw, D (Ed.) Public Sector Accounting; Bahir Dar; Nakura Publications Ltd Ross, S.A (2003) “Cash Accounting Preferred to Accrual Accounting”; http://www.publicfinancialrepoting.com; Retrieved on 10th July 2011 SAFA (2006) A study on Accrual-Based Accounting for Government and Public Sector Entities; September Saleh, Z (2007) “Malaysian Governmental Accounting – National context and user Orientation”; International Review of Business Research Paper; 3(2); 386-394 Veneeva, V (2003) Public Sector Economics; London; Belhaven press
Continue Reading
View Writing Issues

You May Also Find These Documents Helpful

  • Powerful Essays

    Continous Problem - City of Everlasting Sunshine
    • 5852 Words
    • 24 Pages

    Continous Problem - City of Everlasting Sunshine

    Chapter 3 – Modified Accrual Accounting: Including the Role of Fund Balances and Budgetary Authority & Chapter 4 – Accounting for the General and Special Revenue Funds…

    • 5852 Words
    • 24 Pages
    Powerful Essays
    Read More
  • Powerful Essays

    Tactical Decision Making on Sonic Healthcare
    • 9999 Words
    • 32 Pages

    Tactical Decision Making on Sonic Healthcare

    References: Mowen. M., Hansen D.R and Heitger D. , Managerial Accounting-The Cornerstone of Business Decision, 4th Edition, 2012, South Western – Thomson Learning…

    • 9999 Words
    • 32 Pages
    Powerful Essays
    Read More
  • Powerful Essays

    Garmin Ltd./ Financial Analysis
    • 4326 Words
    • 18 Pages

    Garmin Ltd./ Financial Analysis

    Bibliography: Atkinson, A., Kaplan, R., Matsumura, E., & Young, S., (2007) Management Accounting. New Jersey: Pearson Prentice Hall…

    • 4326 Words
    • 18 Pages
    Powerful Essays
    Read More
  • Best Essays

    Accounting Methods: Cash Basis vs. Accrual vs. Hybrid
    • 3317 Words
    • 14 Pages

    Accounting Methods: Cash Basis vs. Accrual vs. Hybrid

    When opening a new business, a small business owner is faced with an enormous amount of decisions to make. One of the most important of those decisions is determining which accounting method they will choose to keep their books. This paper will analyze the accounting methods of cash basis, accrual, hybrid and special accounting methods. It is important to have a thorough understanding of the different methods allowable under the law and how each method differs from the others. The fact is, there is no accounting method that is perfect. Both accounting methods have pros and cons. After carefully evaluating the various accounting methods and the goals of the business, the small business will have to choose which method is the best option. To do this, the business owner must consider the current size of the business, the business plans for future growth, and if third parties such as lenders or shareholders will be involved in the future.…

    • 3317 Words
    • 14 Pages
    Best Essays
    Read More
  • Powerful Essays

    Five Year Financial Analysis and Projection
    • 4968 Words
    • 20 Pages

    Five Year Financial Analysis and Projection

    References: Atrill, P. (2011). Accounting : an introduction / [Peter] Atrill ... [et al.]: Auckland : Pearson, 2011…

    • 4968 Words
    • 20 Pages
    Powerful Essays
    Read More
  • Good Essays

    Cash basis accounting vs accrual basis accounting
    • 866 Words
    • 3 Pages

    Cash basis accounting vs accrual basis accounting

    Cash basis accounting only records cash transactions, which gives little insight to the true financial position of a business. Where as, accrual basis accounting reports events as they occur. Income is only reported when earned and expenses are only reported when incurred. Since cash is always recorded when it is received an accountant will have to make adjustments to the financial statements to account for its prepaid and accrued expenses. (Nobels, et al. 134)…

    • 866 Words
    • 3 Pages
    Good Essays
    Read More
  • Good Essays

    Hertfordshire Business School Guide to Harvard Referencing
    • 5315 Words
    • 22 Pages

    Hertfordshire Business School Guide to Harvard Referencing

    Watson, M. (2007) Management accounting and budgetary control. Public Finance Quarterly. 32(2) March. pp. 234-237 [Online] Available at: http://search.global.epnet.com [Accessed: 25 April, 2012].…

    • 5315 Words
    • 22 Pages
    Good Essays
    Read More
  • Better Essays

    A Comparison Between Cash Accounting and Accrual Accounting
    • 1097 Words
    • 5 Pages

    A Comparison Between Cash Accounting and Accrual Accounting

    Accounting principle and theory are generally referred to two main accounting methods which include cash accounting and accrual accounting. Cash basis accounting on income and cost is determined by the amount of actual payment for reference and accounting recording mode is simple, easy to master. The use of the accrual basis of accounting is more complicated than it with a main difference of recording timing. This essay will firstly separately discuss related conception and theory of cash and accrual accounting. Following this, it will explain the advantages and disadvantages of those two dealing method. Finally, it will offer two examples to describe manipulating profits in accrual accounting, then one preference selection of two main methods is given in the conclusion part.…

    • 1097 Words
    • 5 Pages
    Better Essays
    Read More
  • Satisfactory Essays

    Accrual Basis Accounting Vs
    • 306 Words
    • 1 Page

    Accrual Basis Accounting Vs

    Accrual basis accounting means that regardless if cash was received or not between companies, any transaction that alters a company’s financial statements are recorded in the periods in which the events occur. Also, under accrual basis accounting, companies begin to note expenses when they are acquired even if cash was not paid. For example, even when cash was not received, the company recognizes the revenues as they are earned. On the other hand though, in cash basis accounting, companies will only record the revenue when there is cash being received. The companies will only record expense when the cash is paid. As opposed to the accrual basis accounting, cash basis accounting is a prohibited method under the generally accepted accounting principles. It is not recognized because it violated the revenue recognition principle by not recording revenue when it is earned(c04AccrualAccountingConcepts.qxd Page 162). An accountant may use the cash basis accounting method without violating the generally accepted accounting principles if they are bookkeeping for a small business. This works because smaller businesses require less labor intensive accounting primarily because small businesses typically cannot afford to hire an entire accounting staff. The main reason that this form of accounting is not intended for large companies is because public companies have to document correctly every aspect of financial transactions. Because cash basis accounting disregards the revenue collected, this is a violation and may be seen as fraud(http://www.insidebusiness360.com/index.php/in-electronic-based-society-cash-basis-accounting-does-not-mesh-as-well-16751/).…

    • 306 Words
    • 1 Page
    Satisfactory Essays
    Read More
  • Best Essays

    Financial Reporting
    • 4348 Words
    • 18 Pages

    Financial Reporting

    Alexander, D & Nobes, C. (2007) Financial accounting: an international introduction. 3rd ed. Harlow: Pearson, Prentice Hall.…

    • 4348 Words
    • 18 Pages
    Best Essays
    Read More
  • Good Essays

    The Issues Surrounding Accounting Treatment for Assets and Liabilities Under the Accrual Accounting for the Government of Malaysia.
    • 369 Words
    • 2 Pages

    The Issues Surrounding Accounting Treatment for Assets and Liabilities Under the Accrual Accounting for the Government of Malaysia.

    There are a lot of issues relating accounting treatment for assets and liabilities under accrual accounting for the government of Malaysia. This essay will separate the issues regarding assets and liabilities in different paragraphs.…

    • 369 Words
    • 2 Pages
    Good Essays
    Read More
  • Good Essays

    Development and Classification
    • 5169 Words
    • 21 Pages

    Development and Classification

    Sources of finance. Where capital markets/shareholders are the principal source of finance, accounting focuses on profitability, stewardship, and a fair presentation of results and financial position. There are high levels of disclosure in published financial statements. When banks are the principal source of finance, accounting tends to be conservative and disclosures are usually relatively low (banks have direct access to information). When governments are the principal source of finance, accounting is aimed at the information needs of government agencies such as tax collection, assembling macroeconomic statistics, or compliance with macroeconomic goals.…

    • 5169 Words
    • 21 Pages
    Good Essays
    Read More
  • Powerful Essays

    Diagnostic Study of Accounting and Auditing Practices in
    • 4182 Words
    • 17 Pages

    Diagnostic Study of Accounting and Auditing Practices in

    his chapter presents an overview of Philippine accounting and auditing arrangements. It provides context for the following chapters on professional infrastructure, accounting and auditing standards, accounting and auditing training, and government budgeting and accounting arrangements. The chapter comprises eight sections, as follows: Part One: Accounting 1 – Introduction – identifies historical factors that have influenced accounting arrangements. 2 – The “Philippine Accounting System – describes accounting arrangements. These include the regulatory and organizational framework, accounting bases and accounting information systems. 3 – Financial Reporting – describes financial reporting and disclosure requirements. 4 – Quality of Financial Reporting – reviews evidence regarding compliance with disclosure requirements and the quality of Philippine financial reporting. Part Two: Auditing 5 – Governing Laws and Regulations – describes the laws that govern Philippine auditing practices and audit requirements. 6 – Philippine Auditing Practices – examines Philippine auditing practices by comparing these to regional norms and international best practices. 7 – Public Accounting and Auditing Firms – describes the presence of domestic and international accounting firms in the Philippines. 8 – Issue Synopsis: Accounting and Auditing – summarizes the issues identified in this chapter.…

    • 4182 Words
    • 17 Pages
    Powerful Essays
    Read More
  • Good Essays

    Accountability Model In Malaysia
    • 9861 Words
    • 72 Pages

    Accountability Model In Malaysia

    David R. Stiles is Lecturer in Strategy & Marketing and Yusuf Karbhari is Reader in…

    • 9861 Words
    • 72 Pages
    Good Essays
    Read More
  • Powerful Essays

    ``Interests'' and Accounting Standard Setting in Malaysia
    • 14526 Words
    • 59 Pages

    ``Interests'' and Accounting Standard Setting in Malaysia

    647-59. MIA (1987), Malaysian Institute of Accountants: 1987 Report and Accounts, MIA, Kuala Lumpur. Price Waterhouse (1992), The Goodwill Debate: Forming a View, Price Waterhouse, Kuala Lumpur. Puxty, A.G., Willmott, H.C., Cooper, D.J. and Lowe, T. (1987), ``Modes of regulation in advanced capitalism: locating accountancy in four countries ' ', Accounting, Organizations and Society, Vol. 12 No. 3, pp. 273-91. Robson, K. (1993), ``Accounting policy making and `interests ': accounting for research and development ' ', Critical Perspectives on Accounting, Vol. 3, pp. 1-27. Streeck, W. and Schmitter, P.C. (1985), ``Community, market, state and associations? ' ' in Streeck, W. and Schmitter, P.C. (Eds), Private Interest Government and Public Policy, Sage Publications, London. Susela, S.D. (1996), ``Accounting standard setting in Malaysia ' ', PhD Dissertation, University of Waikato, Waikato. Susela, S.D. and Veerinderjeet, S. (1992), ``Segmental reporting in Malaysia: relevance, extent of compliance and disclosure ' ', Akauntan Nasional, April, pp. 12-20. Tan, L.T. (1991), ``Anomalies in accounting for intangible assets ' ', Malaysian Accountant, August, pp. 3-8. Tan, K.S. (1981), ``Mergers for growth and expansion ' ', The Malaysian Accountant, July, pp. 8-10.…

    • 14526 Words
    • 59 Pages
    Powerful Essays
    Read More

Related Topics