A budget is a qualitative plan prepared for a given time. Most of the organizations and the state prepare budgets expressing their financial terms every year. Budgets can be used for various purposes, which include, planning; a budget forces the organizations and businesses to look to the future. This helps the management from poor coordinated planning. Budgets are better tools of controls in the state. This is where, organizations actual controls are compared against the budgeted, and appropriate actions are taken in case of any variance (Alexander, 2014).
In this case, the budget would help in acquiring detail information about where the administration is channeling its money. The state of union presents a broad vision of goals and priorities instead of providing the details. This makes it difficult to have a clear picture of where the state stands financially and where the state is heading while assessing the future. This is happening because the United State Government is using cash base accounting system instead of accrual accounting, which is the recommended standard accounting practice for large and complex entities by the Securities and Exchange Commission (Alexander, 2014).
The entities may face challenges in adopting this method; they have an option of using the generally accepted accounting standards. All this is to make the presidential and the federal budget more transparent and encourage more fiscal responsibility and accountability. The best reason for using accrual accounting is because; it is very simple and helps large entities to plan for long term goals such as health (Alexander, 2014).
Moving the concept of federal budgeting and accounting to accrual standard, the move will help increase the understanding of true deficit and debts. In addition to that, it will help improve accountability.
Reference
Alexander, R. (2014). “Government accounting practices makes fiscal discussion more difficult.” Retrieved on February15,2014 from. http://www.usnews.com/opinion/blogs/economic-intelligence/2014/01/28/the-governments-accounting-practices-makes-budget-debates-worse
