Which of the following is NOT true about cash basis budgeting?
A) Cash basis budgeting permits a government to balance its budget by delaying cash disbursements.
B) Cash basis budgeting permits a government to balance its budget by advancing the recognition of revenue.
C) Cash basis budgeting encourages interperiod equity.
D) Cash basis budgeting complicates financial accounting and reporting.

Question

Quizplus · Accepted Answer

Cash basis budgeting does not encourage interperiod equity because it recognizes transactions only when cash changes hands, which can lead to a mismatch between when revenues are earned and when they are received, as well as when expenses are incurred and when they are paid. This approach can distort the true financial position and performance of an entity over time, making it challenging to ensure that the costs of providing services are borne by those benefiting from the services in the same period.

Which of the Following Is NOT True About Cash Basis