Moving towards Accrual Basis Accounting: Assessing the Benefits, Challenges, Suitability, and Implementation for Public Sector Organizations in Pakistan Abstract
Keywords:
Accrual basis, Accounting, Cash basis, Public sector organizations, Generally Accepted Accounting Principles, Financial Accounting Standards Board, and International Financial Reporting Standards.Abstract
Shifting from cash basis accounting to accrual basis accounting can have several benefits for public sector organizations in Pakistan. However, it also comes with its set of challenges. The objectives of this study are to evaluate the benefits, challenges, suitability, and implementation of shifting from a cash basis to an accrual basis accounting system in public sector organizations in Pakistan. Currently, most of the state-owned organizations in Pakistan practice a cash based accounting system. However, the world is now switching towards accrual accounting, and many countries have already initiated the transition. This research study has adopted the qualitative approach using Interpretivism. Interviews with 14 public sector personnel were conducted, who are directly related to the accounts, audit, and administrative departments of their organizations. The case study method was applied. The results suggest that shifting from cash to accrual basis accounting can bring numerous benefits to public sector organizations in Pakistan, such as accurate financial reporting, better decision-making, enhanced budgeting & planning, and improved resource management. However, it requires careful planning, stakeholder engagement, capacity building, and adequate resources to ensure a successful transition. Training & development, digitalization, IT upgradation, support of leadership, and adoption of a systematic change process can also play a significant role. The outcomes of this study can be useful for governmental institutions and policymakers. The government can also use this research to reduce the resistance among the users by informing them about the benefits it offers.
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