Why Accrual Accounting Matters

Decision-makers must have the right information if they are to make informed, timely decisions across the vast range of different decisions governments face. These include the decisions necessary to manage the operations of a huge, complex organization that produces a wide range of different services, operates in multiple currencies, and has a large and complex balance sheet. It also includes the decisions intended to manage the impact of the government's finances on the wider economy. Beyond making decisions, good accounting information is also necessary to the execution of those decisions. The chapter distinguishes accrual accounting from the cash basis of accounting that has traditionally been used by governments and outlines why the balance sheet is so important. It outlines some deficiencies in the conventional balance sheet and introduces the comprehensive balance sheet.