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Cash vs Accrual Budgeting


"Is the budget typically cash basis? Classic example, prepaid expense. On financials, expense recorded each month. So budget = cash basis financials?"

This question was asked at a recent webinar, now available on-demand:

"Budgeting Best Practices"

Please add your thoughts about it below. Thanks!


Gene Siciliano
Title: President
Company: Western Management Associates
LinkedIn Profile
(President, Western Management Associates) |

No. the P&L budget should always be accrual basis. That’s why it’s essential to also build an integrated cash flow statement, which converts the P&L to cash impact and then adds on all the cash impacts that do not flow thru the income statement. In that fashion you have the benefit of being able to plan and manage both the cash and the reportable P&L results.

Topic Expert
Alan Hart
Title: Consultant
Company: Pacific Shine Group
(Consultant, Pacific Shine Group) |

Your budget should always match your actual accounting. Think of it as a future version of your Income Statement. I highly recommend also budgeting your Balance Sheet and Statement of Cash Flows and analyzing your monthly results against their “future” counterparts. These activities should take place year round and not only during budget preparation time.

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