On numerous occasions proposals have surfaced to put the federal government on the accrual basis of accounting. This is no small issue because if this basis were used, it would mean that billions in unrecorded liabilities would have to be booked and the federal deficit would increase substantially.

Instructions

(a) What is the difference between accrual basis accounting and cash basis accounting?

(b) Comment on why politicians prefer a cash basis accounting system over an accrual basis system.

(c) Write a letter to your senator explaining why you think the federal government should adopt the accrual basis of accounting.

ETHICS CASE