6. (14 points) Here is the accrual budget and cash budget for a SAME government for the same month. However, as you can see from the two budgets, same numbers are different between the two because of different accounting basis.

Accrual budget (Jan 2020) Cash budget (Jan 2020)

Revenues / Cash receipts:

Taxes: 500,000 400,000

Fees: 230,000 350,000

Donations: 0 500,000

Total Revenues / Cash receipts: 730,000 1,250,000

Expenses / Cash disbursements):

Capital projects: 0 100,000

Long-term financing: 300,000 450,000

Personnel expenses: 600,000 500,000

Total Expenses / Cash disbursements: 900,000 1,050,000

Surplus/deficits (cash balance) (170,000) 250,000

Explain:

(1) What are the benefits of having both the accrual budget and the cash budget?

(2) Using your understanding of the differences between accrual and cash budgets explain the most likely reasons for the different numbers for EACH category? You may give some examples of some activities that could lead to these different numbers in EACH category. You should provide at least one possible reasons for each of the six categories (Taxes, fees, donations, capital projects, long-term financing, and personnel expenses). There is no unique answer for each category. Your answers may vary.

Explain why the numbers could be different due to difference between accrual and cash budget:

Taxes:

Fees:

Donations:

capital projects:

long-term financing:

personnel expenses: