Question

Question 2 (optional)

You have been appointed the Head of Administration of a public sector entity, which is currently applying cash basis of accounting to the recognition of financial transactions and events. You have a strong conviction that the use of accrual basis of accounting is most appropriate for the entity.

Required: Write a Memorandum to the Principal Spending Officer of the entity advocating for the immediate adoption and implementation of the accrual basis of accounting for the entity. In addition, highlight the implementation challenges of your proposal and how these can be addressed.

Answer 1

DEAR SIR,

WE ARE FOLLOWING A SYSTEM WHICH ONLY RECORDING CASH TRANSACTIONS.IT IS SLOWLY KILLING OUR SYSTEM.BECOUSE IT IS NOT PERFECT AND THERE HAVE MANY LOOPS IN THIS SYSTEM.AS PER MY ANALYSIS WE NEEDED TO ADOPT A NEW SYSTEM WHICH HELP TO BE PERFECT IN THE RECORDING CALLED ACCRUAL SYSTEM

ACCRUAL SYSTEM

ACCRUAL ACCOUNTING IS AN ACCOUNTING METHOD WHERE REVENUE OR EXPENCES ARE RECORDED WHEN A TRANSACTION OCCURS RATHER THAN WHEN PAYMENT RRECIVED OR MADE.THIS METHOD FOLLOWS MATCHING PRINCIPLE MEANS EXPENCES AND REVENUE SHOULD BE RECORDED IN SAME TIME.IT IS EXACTLY DEFFERENT FROM OUR CURRENT SYSTEM

BENEFITS OF APPLYNG ACCRUAL SYSTEM IN THE DEPARTMENT

1.PERFORMANCE WILL CHANGE : IT IMPLIES FINANCIAL AND MONITORING ACTIVITIES.

2.ACCURACY ;ACCRUAL ACCOUNTING IMPROVE ACCURACY OF RECORDING WHICH HELP TO UNDERSTAND EXPENCES AND INCOMES CLEARLY

3.PLANING OF FUTURE : ACCRUAL BASIS ACCOUNTING SYSTEM MAKE A CLEAR VIEW ABOUT TRASACTIONS WHICH WILL BE RECIVE IN FUTURE.SO IT IS VERY HEALPFULL FOR DECISION MAKING AND ANALYSING THE CURRENT SITUATIN

EVERY COIN HAS A ANOTHER SIDE,SO IN THE APPLICATION OF THE NEW ACCRUAL ACCOUNTING SYSTEM WE NEED TO OVERCOME SOME SITUATIONS

1.IT IS TIME CONSUMING

2.REQURE PROFESSIONAL ACCOUNTANT

3.COMPLEXITY WILL INCREASE