ACCRUAL, MODIFIED ACCRUAL and
CASH ACCOUNTING

Interim Statements. An association's interim financial statements, periodic or as compiled, must be prepared in accordance with an accrual or modified accrual basis of accounting. Civil Code §1365.2(a)(1)(C) This includes the following:

• Balance sheet
• Income and expense statement
• Budget comparison
• General ledger

Accrual Accounting. The most commonly used accounting method, which reports income when earned and expenses when incurred, as opposed to cash basis accounting, which reports income when received and expenses when paid. This means that revenues and expenditures/expenses are posted in the accounting period to which they are attributable, although the related cash receipts or disbursements may not be recorded until the subsequent accounting period.

Cash Basis Accounting. The bookkeeping practice of recording sales and expenses only when cash is actually received or paid out.

Modified Accrual. Modified accrual accounting is based on revenues being recognized in the period when they become available and measurable (known). The term "available" means collectible within the current period or soon enough thereafter to be used to pay the liabilities of the current period. Expenditures, if measurable, are recognized in the accounting period in which the liabilities are incurred, regardless of when the receipt or payment of cash takes place.

Updated by ADAMS KESSLER 8/9/2008