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Accrual Accounting And The Kenyan Government

Anslem Murimi by Anslem Murimi
February 28, 2023
in News
Reading Time: 2 mins read
Accounting

Accounting [Photo/Courtesy]

The accrual basis of accounting requires revenues and expenditures to be recorded in financial statements when they are earned and incurred respectively. The cash basis of accounting requires transactions to be recorded only when a cash flow has occurred. 

A significant number of Kenyan ministries, State departments, and agencies use cash accounting, which provides a less accurate picture of their financial position. 

Read: Solving Nigeria’s Cash Shortage With Mobile Money An Opportunity

For example, an accrual basis would indicate credit sales as sales and the money owed to the company as a receivable. This means that when the credit sales are paid for in a later period, it is indicated simply as a receipt of payments. Cash basis would only record the sales in the later period when the cash flow occurs, which does not provide full information. 

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The Public Sector Accounting Standards Board intends to complete the migration of the  Kenyan government from a cash basis to an accrual basis of accounting in June 2023 to give a clearer picture of the financial position of State entities.

Read: KCB Revises Interest Rates On Its Savings Accounts

This would lead to, for instance, improvements in the handling of pending bills, which would be recorded in financial statements as liabilities, enhancing completeness, follow-up, and settlement of bills. Moreover, Public Debt accrual accounting gives a complete view of government debt in both financial and non-financial terms through disclosures.

These transactions would be recorded when they are undertaken, not simply when the resultant cash flows occur.

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