How do you record accrual basis accounting?
Mia Phillips
Updated on February 28, 2026
The accrued expense will be recorded as an account payable under the current liabilities section of the balance sheet and also as an expense in the income statement. On the general ledger, when the bill is paid, the accounts payable account is debited and the cash account is credited.
Which of the following would use the modified accrual basis of accounting?
Modified accrual basis accounting is used for all governmental funds (general, federal special revenue, other special revenue, general debt service, debt service, and capital projects). Under the cash basis, transactions are recognized only when cash changes hands.
Who uses modified accrual basis?
governmental agencies
Modified accrual accounting is used and accepted by governmental agencies because they focus on current-year obligations.
When to use modified accrual or cash basis accounting?
Updated Apr 15, 2019. Modified accrual accounting is an alternative bookkeeping method that combines accrual basis accounting with cash basis accounting. It recognizes revenues when they become available and measurable and, with a few exceptions, records expenditures when liabilities are incurred.
When are revenues reported on the accrual basis?
Under the accrual basis of accounting (or accrual method of accounting), revenues are reported on the income statement when they are earned.
How are long term items recorded in modified accrual accounting?
Under the modified accrual method, these long-term items are recorded on the balance sheet and depreciated, depleted, or amortized over the life of the asset or liability. This systematic distribution of expenses or revenues allows future financial statements to have more comparability.
How is inventory expensed on an accrual basis?
This is the same approach used under the accrual basis of accounting, though inventory and prepaid items can be recognized as expenditures when purchased, rather than first being capitalized as an asset. In addition, depreciation expense is not recognized. Instead, assets are expensed when purchased.
