Modified Accrual Accounting
The accounting method used for governmental funds (like the general fund), where revenues are recognized when measurable and available, and expenditures are recognized when the liability is incurred.
How It Works
Modified accrual is a hybrid between cash accounting (recording transactions when cash changes hands) and full accrual accounting (recording when economic events occur). It provides a near-term focus appropriate for governmental budgeting, where the key question is: how much cash is available to spend? Enterprise funds and government-wide financial statements use full accrual accounting. Understanding the difference is essential for reading municipal financial statements correctly.
Related Terms
- Generally Accepted Accounting Principles (GAAP) — The standardized accounting rules that governments follow when preparing financial statements, as promulgated by the Governmental Accounting Standards Board (GASB).
- Governmental Accounting Standards Board (GASB) — The independent organization that sets accounting and financial reporting standards for U.S. state and local governments.
- Comprehensive Annual Financial Report (CAFR/ACFR) — A city's official annual financial report, audited by independent accountants, containing detailed financial statements, statistical data, and management discussion.
About This Definition
This definition is part of the CitySpend Municipal Finance Glossary — 59 terms explaining how city governments fund and manage public services. All definitions are written in plain language for taxpayers, journalists, students, and municipal bond investors.