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(b) Politicians might desire a cash-basis accounting system over an accrual-basis system because ….. they only record money when it is received and when cash is paid out. It can be misleading and not match up because when you are dealing with cash there is not real proof that it was received and there is no paper trail that is left behind. EXERCISE 3-2 (Continued) Dear Senator, It is my understanding, after having taken a beginning course in accounting principles, that the Federal government uses a cash-basis system rather than an accrual-basis accounting system. The government would benefit from an accrual accounting financial system as the accrual method of reporting financial information is prepared and contains useful information and assists with the accountability and decision-making. Financial reports prepared on an accounting accrual basis provide: • Accountability for all resources • Identifies controls and the deployment of assets • Assess performanceof programs • Financial position and cash flows This information is useful in making decisions that are feasibility of financing the services they wish to provide and demonstrates accountability to the public for the management of assets and liabilities, in which is recognized in an accrual financial statement report. The accrual method will assist planning the future funding requirements as it outlines for a repayment by managing the cash position and financing requirements. Accrual accounting provides information on: • Revenues and expenses • Impacts transactions where cash has not yet been received or paid • Accurate information on revenues • Assessing the impact of taxation and other revenues on the government’s fiscal position • Assessing the need for borrowing in the long term. The financial statement information on revenueshelps to assess whether current revenues are sufficient to cover the costs of current programs and services. Accrual accounting requires organizations to maintain complete records of assets andliabilities, which in return it facilitates a better management of assets, including better maintenance of records and the disposal of surplus assets, and also assists managing risks. The identification of assets and therecognition of depreciation helps determine and understand the impact of using fixed assets inthe delivery of services encouragingfor alternative ways to manage cost and the delivery of services and or programs. With the assistance of the Governmental Accounting Standards Board (GASB) guidelines and constant review and implementations to ensure business financial information are accurately reported, the government would benefit from the same benefits as many businesses and corporations have adapted the accrual accounting method as accrual accounting provides a consistent framework for the identification of existing liabilities, potential or contingent liabilities. Sincerely, Concerned Student