Changing the accounting basis, the prerequisite for operational budgeting

Iran’s state accounting system uses the modified cash basis. Without considering their dues, the income is recorded at the time of its collection and the expenses are also recorded at the time of payment. Thus, the income and expenses which are due but not yet paid are practically not reflected in the bills and registration offices in a fiscal period. In this method, no clear image of the financial bills is depicted and the operation results and the financial status are not reliable as well. Using the accrual accounting basis, it would be possible to clearly reflect the expenses and incomes in a fiscal period and a more appropriate image would be depicted of the financial status and the operation results. In order to provide and perform the operating budget, it is necessary to have an access to all the due expenses including paid and unpaid to calculate the cost price of the services and productions. Calculating the cost price through the present basis is not actually possible in the state organizations. This defect will lead to the shortcomings in financial reporting in the accounting basis. Review of the conducted studies suggests that there has been no widespread research on this issue. But the steps taken in municipalities, the municipality of Tehran in particular, emphasizes on the benefits of such basis and paves the way for operational budgeting. This study, by using library resources and through a descriptive method, has been conducted for determining the accounting basis, the benefits of accrual accounting, various methods of budgeting, the financial reporting goals and the role of accounting systems in non-profit institutes.