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<br /> <br />Basis of Accounting <br /> <br />. Refers to the point in time when a local <br />government recognizes (records a transaction) <br />revenues, expenditures/expenses, assets and <br />liabilities in the journal to be reflected in the <br />financial statements. <br />. Currently there are three basis of accounting <br />that are used by local government entities. <br /> <br /> <br />Basis of Accounting <br /> <br />. Cash basis <br />- Records transactions only when local government <br />receives or pays out cash. <br />- Allowed for local governments under 2,500 <br />population in MN, but not encouraged by the State <br />Auditors Office. <br /> <br /> <br />Basis of Accounting <br /> <br />. Accrual basis <br />- Records transactions as they occur, regardless of <br />when cash is received or paid out. <br />- Must be used for proprietary fund types and most <br />fiduciary funds (Measurable and Earned) <br /> <br />8 <br />