Budgetary accounting and how it is used in governmental accounting

In the accounting world, the generally accepted accounting principles, or GAAP, typically govern what is reported and how is reported in accounting records. However, this is not necessarily the case when it comes to budgetary basis accounting. Budgetary basis accounting is often used in governmental accounting and is not subject to the same provisions of GAAP. The differences between the two may be summarized or categorized into four important distinctions.

Basis

1. Generally accepted accounting principles use accrual basis of accounting as the primary method for recording and calculating information. Accrual accounting is the idea that financial transactions are noted and recorded at the same time or around the same time that they take place. Budgetary basis accounting uses either a modified accrual basis or the cash plus encumbrances method. Modified accrual accounting combines accrual accounting and cash basis accounting. This means that expenditures and liabilities are often recorded when they occur, but can also take place when physical cash is used as the basis for the transaction.

Timing

1. Timing is part of this difference used in the various accrual methods. In GAAP accounting, the transactions based on accrual methods are concurrent with the recording of those transactions. However, with budgetary basis accounting, this is not required. Instead, there can be a lapse between the budgetary period and the accounting period. In other words, the actual recording of the financial transactions and the reconciliation can take place at a later date.

Reporting

1. The reporting perspective of budgetary basis accounting can also differ somewhat from the reporting perspective of GAAP accounting. In budgetary basis accounting, certain items can be reported as part of the general fund, whereas in GAAP accounting these same items must be reported separately. One example of this is in the reporting of debt service. The budgetary accounting basis allows for debt service in the general fund, whereas GAAP accounting does not. This is simply a matter of the basis structuring of accounting methods.

Entities

1. The fourth final major difference between GAAP and the budgetary accounting basis is in the reporting of entities for which funds are typically allocated. In GAAP accounting, each entity is noted and recorded. However, in budgetary basis accounting, not every entity for which funds have been appropriated will necessarily show up in the government's budget and in the general account. Whenever this occurs, it is referred to as an entity difference. For instance, the government's housing and urban development department is funded in part by bonds that it issues. These bonds do not necessarily show up on a budget report as part of the government's debt, even though HUD is a governmental agency.

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journal article

The Accounting Historians Journal

Vol. 4, No. 1 (Spring 1977)

, pp. 89-100 (12 pages)

Published By: The Academy of Accounting Historians

https://www.jstor.org/stable/40697456

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The Accounting Historians Journal is here available in digital full-text thanks to the kind permission of the Academy of Accounting Historians. Included are files and bibliographic records for each issue and for each major item in each issue. From 1974 to 1992, both a searchable PDF and a separate page-image PDF are provided. From 1993 to 1998, the PDF page image contains embedded searchable text, reflecting advances in PDF technology. As the software does not always translate images to text accurately and proofreaders do not catch all the software reading errors, having both an image and a searchable text file allows the researcher immediately to check the accuracy of any questionable transcription. Beginning in 1999, native (searchable) PDFs are provided by the publisher.

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The Academy of Accounting Historians was formed in 1973.  It was granted a charter as a not-for-profit corporation in the State of Alabama and, subsequently, was granted tax-exempt status in the United States.  The objectives of the Academy are to encourage research, publication, teaching and personal interchanges in all phases of Accounting History and its interrelation with business and economic history. Membership in the Academy is open to all persons in all countries who are interested in Accounting History.  Academy membership includes a subscription to the Accounting Historians Journal (two issues per year), the Notebook (the semi-annual newsletter), membership rates for meetings and conference, including the annual conference and access to the membership directory.  In addition, there are member prices on back issues of the Journal to 1973.  

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