Question: What is a good definition of modified accrual accounting, and how does this relate to California school district accounting?

Response: This definition is included in the California School Accounting Manual: Modified accrual accounting is based on revenues being recognized in the period when they become available and measurable (known). The term "available" means collectible within the current period or soon enough thereafter to be used to pay the liabilities of the current period. Expenditures, if measurable, are recognized in the accounting period in which the liabilities are incurred, regardless of when the receipt or payment of cash takes place. An exception is un-matured interest on general long-term debt, which should be recorded when it is due. All governmental funds and the expendable trust and agency funds are accounted for on the modified accrual basis. In both the accrual basis and the modified accrual basis of accounting, when the amount of the revenues or expenditures is not known (measurable), it should not be recorded.

The term available, with respect to revenue, means collectible within the current period or soon enough thereafter to be used to pay the liabilities of the current period (within 45,60 or 90 days). The California Department of Education has defined available as collectable within one year.

This description relates to the entries into the general ledger accounts. General ledger amounts reflect amounts actually received and expended, or estimates of accounts receivable or current liability amounts that are measurable.

The accrual method is not used in budget amounts. Budgeted revenues and expenditures are based on estimates of current period or annual estimates of activity.