Whats the difference between cash-based accounting and accrual accounting?
Cash-based accounting is a simple calculation of federal revenues (taxes) and outlays (expenditures) for any fiscal year (FY). The Budget of the United States Government is prepared by the Office of Management and Budget (OMB) using the cash-based accounting method. These are the numbers typically used by government agencies and reported by the press. Accrual accounting, in contrast, is a complex and nuanced method which aims to account for the future impact of government revenues and expenditures, recognizing obligations (e.g. guaranteed student loans) that are provided for in the present but won’t show up in the OMB’s budget for a given fiscal year. Macroeconomists use accrual accounting methods to determine GDP. The Bureau of Economic Analysis (BEA) also uses accrual accounting methods to illustrate “how the federal government fits into a general economic framework” as both a supplier and consumer. Because cash-based accounting simply measures cash income and outcome for a given yea
