Fair warning: This column is about state accounting practices, which means you are in danger of being stupefied.
Most family budgets are calculated on a “cash basis.” They count income as it is received and outgo as bills are paid.
Corporations, however, generally use “accrual” accounting, in which both revenues and expenses are recorded when they are earned or incurred, providing a fuller picture of their true financial situations for regulators and stockholders.
In theory, governments should use accrual in response to the Governmental Accounting Standards Board’s recommendations, but GASB’s rules are complex and compliance is largely voluntary.
They are, therefore, relatively free to use whichever system suits them, meaning their budgets may hide realities that are not politically digestible.
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