Economic Flows, Stock Positions, and Accounting Rules 49
Th ese alternative recording bases are discussed in
more detail in paragraphs 3.61–3.68.
Alternative recording bases
3.61 While making entries for all successive stages
discernible within the activities of institutional units
may be possible, it could severely overburden compilers,
so a choice has to be made. Broadly, the time of record-
ing could be determined on four bases: the accrual basis,
the commitments basis, the due-for-payment basis, and
the cash basis. In practice though, many variations on
these bases of recording may exist. Accounting systems
may use a mixed basis of recording; for example, tax
revenue may be recorded on a cash basis while other
transactions are recorded on an accrual basis.
3.62 In the accrual basis of recording, fl ows are
recorded at the time economic value is created, trans-
formed, exchanged, transferred, or extinguished. In
other words, the eff ects of economic events are re-
corded in the period in which they occur, irrespective
of whether cash was received or paid, or was due to be
received or paid. Nevertheless, the time at which the
economic events occur is not always clear. In general,
the time attributed to events is the time at which eco-
nomic ownership of goods changes, services are pro-
vided, the obligation to pay taxes is created, the claim
to a social benefi t payment is established, or other un-
conditional claims are established.
3.63 If an economic event requires a subsequent
cash fl ow, such as purchases of goods and services on
an installment plan, then the length of time between
the time attributed to an event with the accrual basis
and the time of the cash fl ow is bridged by record-
ing other accounts receivable/payable. For example,
when a general government unit purchases goods on
credit, it records a debit to an inventory account and
a credit to other accounts payable when ownership of
the goods shift s. When the cash payment is made, the
general government unit records a debit to other ac-
counts payable and a credit to currency and deposits.
3.64 All events that result in the creation, transfor-
mation, exchange, transfer, or extinguishment of eco-
nomic value are recorded on an accrual basis in the
GFS Statement of Operations or Statement of Other Eco-
nomic Flows (see paragraphs 4.16–4.31 and 4.36–4.38).
Th us, all monetary and nonmonetary transactions are
included in statistics compiled on the accrual basis.
3.65 In the commitments basis of recording, fl ows
are recorded when an institutional unit has commit-
ted itself to a transaction. Th is basis oft en applies only
to purchases of assets, goods, services, and to com-
pensation of employees. Th e time of recording gen-
erally is when approval for the purchase was issued,
which results in funds being earmarked for a specifi c
transaction. Flows for which the commitments basis
is not applicable, such as revenue, must be recorded
using one of the other three bases of recording. In-
kind transactions may or may not be recorded.
3.66 In the due-for-payment basis of recording,
fl ows that give rise to cash payments are recorded at
the latest times they can be paid without incurring ad-
ditional charges or penalties or, if sooner, when the
cash payment is made.^14 Th e period of time (if any)
between the moment a payment becomes due and the
moment it is actually made is bridged by recording
other accounts receivable/payable, just as with the ac-
crual basis. If a payment is made before it is due, then
no receivable is necessary. Although due-for-payment
recording furnishes a more comprehensive descrip-
tion of monetary fl ows than cash accounting, record-
ing is limited to monetary fl ows and therefore does
not capture all economic events.
3.67 In the cash basis of recording, fl ows are re-
corded when cash is received or disbursed. Th e cash
basis of recording provides analytically useful infor-
mation on the liquidity position of government, which
allows for liquidity management. All events resulting
in a cash fl ow are recorded in the GFS Statement of
Sources and Uses of Cash (see paragraphs 4.32–4.35).
Nonmonetary fl ows are not recorded, since no cash
fl ows are involved in these transactions. Th erefore,
the cash basis of recording does not fully record all
economic activity and resource fl ows.3.68 Cash fl ows determine the government’s abil-
ity to pay its bills and, by infl uencing the liquidity of
the community, activate or validate the demand for
goods and services in the rest of the economy. Tra-
ditionally, payments data form the basis for most
government accounting systems and oft en represent
the most readily available estimates generated by the(^14) Another basis of recording is when fl ows are recorded at
the time legal controls that are necessary to authorize a pay-
ment have been completed. Th is basis of recording is entitled
“due-and-payable.”