In full accrual accounting, revenue for the period is determined first, and then costs are MATCHED to revenues (not periods). Since revenue often varies, it is much harder to budget, too much is driven by the economy. When costs are not able to be matched, they are assigned to the period incurred. If the costs are for more than the current period, they are spread out through amortizations (of which depreciation is one class). The modified accrual process requires revenues and expenses to MATCH the period in which they are authorized if they are paid or received within 60 days. From this perspective, we eliminate amortizations, which are estimates. This is a key difference for proprietary funds. Why do we not apply this to the road department for example?

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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In full accrual accounting, revenue for the period is determined first, and then costs are
MATCHED to revenues (not periods). Since revenue often varies, it is much harder to budget,
too much is driven by the economy. When costs are not able to be matched, they are assigned
to the period incurred. If the costs are for more than the current period, they are spread out
through amortizations (of which depreciation is one class). The modified accrual process
requires revenues and expenses to MATCH the period in which they are authorized if they are
paid or received within 60 days. From this perspective, we eliminate amortizations, which are
estimates. This is a key difference for proprietary funds.
Why do we not apply this to the road department for example?
Transcribed Image Text:In full accrual accounting, revenue for the period is determined first, and then costs are MATCHED to revenues (not periods). Since revenue often varies, it is much harder to budget, too much is driven by the economy. When costs are not able to be matched, they are assigned to the period incurred. If the costs are for more than the current period, they are spread out through amortizations (of which depreciation is one class). The modified accrual process requires revenues and expenses to MATCH the period in which they are authorized if they are paid or received within 60 days. From this perspective, we eliminate amortizations, which are estimates. This is a key difference for proprietary funds. Why do we not apply this to the road department for example?
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