Understanding Similarities and Differences Between Accrual and Cash Deficits

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Other written product issued by the Government Accountability Office with an abstract that begins "Two key measures that have been used as indicators of the government's annual fiscal condition are the unified budget deficit measured primarily on a cash basis and the net operating cost measured on an accrual basis for financial statement purposes. The unified budget deficit has historically been the focus of budget debates and media reports in part because it closely approximates the government's short-term borrowing needs. Cash accounting can also be useful for controlling spending in the current year. However, the cash measure of fiscal condition, ... continued below

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United States. Government Accountability Office. December 1, 2006.

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Description

Other written product issued by the Government Accountability Office with an abstract that begins "Two key measures that have been used as indicators of the government's annual fiscal condition are the unified budget deficit measured primarily on a cash basis and the net operating cost measured on an accrual basis for financial statement purposes. The unified budget deficit has historically been the focus of budget debates and media reports in part because it closely approximates the government's short-term borrowing needs. Cash accounting can also be useful for controlling spending in the current year. However, the cash measure of fiscal condition, which is similar to keeping a checkbook, by nature excludes information about the long-term consequences of today's policy decisions and operations. Indeed, understanding our nation's long-term fiscal outlook is important because, as GAO's long-term simulations show, current fiscal policy is unsustainable. The accrual measure primarily provides more information on the longer-term implications of today's policy decisions and operations by showing certain costs incurred today but not payable for years to come, such as civilian and military pensions and retiree health care. While cash and accrual measures each serve different purposes, they present complementary information and can be used together to provide a more comprehensive picture of the government's fiscal condition today and over time. The goal of this primer is to improve understanding of the accrual deficit by describing (1) how it is similar and different from the more commonly reported cash budget deficit, (2) the key drivers behind changes in accrual deficits relative to cash budget deficits, and (3) how the two measures complement each other and give a fuller picture of the government's overall fiscal condition. In addition, see GAO-07-341SP for updates to selected information in this document."

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Government Accountability Office Reports

The U.S. Government Accountability Office (GAO) is an independent, nonpartisan agency that works for the U.S. Congress investigating how the federal government spends taxpayers' money. Its goal is to increase accountability and improve the performance of the federal government. The Government Accountability Office Reports Collection consists of over 13,000 documents on a variety of topics ranging from fiscal issues to international affairs.

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  • December 1, 2006

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  • June 11, 2014, 5:03 a.m.

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United States. Government Accountability Office. Understanding Similarities and Differences Between Accrual and Cash Deficits, text, December 1, 2006; Washington D.C.. (digital.library.unt.edu/ark:/67531/metadc290467/: accessed September 21, 2018), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.