What is the accounting system used by the City of Los Angeles?

The City of Los Angeles employs a modified cash accrual accounting system, which combines elements of both cash and accrual accounting methods. This approach allows the city to recognize revenues when they are measurable and available, while expenses are recognized when they are incurred regardless of when cash is exchanged.

This method is particularly useful for government entities because it provides a more accurate picture of the fiscal health of the city. It ensures that the financial statements reflect liabilities that will eventually need to be settled while still maintaining a focus on the cash that is available for immediate use.

By utilizing modified cash accrual accounting, Los Angeles can effectively manage its funds and financial reporting, adhering to governmental accounting standards while providing transparency and accountability to its taxpayers. This system thus strikes a balance, allowing for responsible fiscal management while addressing the unique needs of governmental financial reporting.