Republic of the Philippines

Mindanao State University

College of Education
Graduate Education Department’

Reporter : Halimah B. Macada-ag

Course Title : Educ 304(FISCAL MANAGEMENT IN EDUCATIONAL INSTITUTIONN)
Professor : MONTIA JAMILAH D. SARIP, MAT,MAEd., Ph. D.
Topic : Organizational Structure for Efficient Operation

Organizational Structure for Efficient Operation

A. Cash Accounting vs. Accrual Accounting

Cash Accounting - The basis of accounting in which the recognition of revenues and
expenses are done only when there is actual receipt or disbursement of cash takes place.
In this method, in which the income or expense is recognised when the inflow or outflow
of cash exists in reality.

Accrual Accounting - is the base of present accounting. It is also known as the

mercantile system of accounting wherein the transactions are recognised as and when
they take place. Under this method, the revenue is recorded when it is earned, and the
expenses are reported when they are incurred.

Key Differences Between Cash Accounting and Accrual Accounting

1. The accounting system in which the income or expense is recognised when an exchange
of consideration is actually done is known as Cash Accounting. Accrual Accounting, in
which the income or expense is recognised when it arises.
2. Cash Accounting is simple as compared to Accrual Accounting.
3. Cash basis of accounting is not a recognised method as per companies act, whereas
accrual basis of accounting is a recognised method.
4. In Cash accounting, the income statement, shows lower income, while in accrual basis of
accounting the income statement shows relatively higher income.
5. Cash Accounting is not in alignment with the matching concept, whereas the concept
completely applies in Accrual Accounting.
6. The basis of cash accounting is actual receipt and payment of cash. On the other hand, in
accrual accounting, the recognition is done when the revenue or expense occurs.
7. The degree of accuracy is more in accrual accounting, which is very less in cash
accounting.
8. Cash Accounting is suitable for sole proprietors or contractors. Conversely, big
enterprises should prefer Accrual Accounting.

Comparison Chart

BASIS FOR
CASH ACCOUNTING ACCRUAL ACCOUNTING
COMPARISON

Meaning The accounting method in which the The accounting method in

income or expense is recognized only which the income or expense is
when there is actual inflow or outflow recognized on mercantile basis.
of cash.

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BASIS FOR
CASH ACCOUNTING ACCRUAL ACCOUNTING
COMPARISON

Nature Simple Complex

Method Not recognized method as per Recognized method as per

companies act. companies act.

Income statement Income statement shows lower Income statement will show a
income. comparatively higher income.

Applicability of No Yes
matching concept

Recognition of Cash is received Revenue is earned

revenue

Recognition of Cash is paid Expense is incurred

expense

Degree of Accuracy Low Comparatively high

B. Types of Fund
1. Delegated funding – refers to funds that has no particular conditions on how the
school uses it provided any expenditure supports the core purpose of the school. (e.g.
the funds dedicated to school grants)
2. Devolved Funding – those funds that comes with conditions on how thw money can
be spent. For example, you must be able to demonstrate how pupil premium money is
benefiting target students.
3. Capital Funding - are those funds that can only be used to improve a long-term asset
(e.g. upgrading buildings or the school’s IT)
4. Revenue Funding – are those funding that should be used within a year ( on salaries,
running costs, curriculum resources, etc.)

References:

Difference Between Cash Accounting and Accrual Accounting by Surbhi S

https://keydifferences.com/difference-between-cash-accounting-and-accrual-accounting.html

Understanding school finances http://www.educationalleaders.govt.nz/Managing-your-

school/Guides-for-managing-your-school/Understanding-school-finances

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