Modified Cash Basis Accounting for nonprofits is a hybrid of cash basis and accrual basis accounting. Under this method, certain transactions are recorded using accrual basis accounting while others are recorded using cash basis accounting. For example, revenue and expenses related to long-term assets or liabilities are recorded using accrual basis accounting, while all other transactions are recorded using cash basis accounting. This method offers a compromise between the simplicity of cash basis accounting and the accuracy of accrual basis accounting. It is often used by small to medium-sized nonprofits that have some complexity in their financial transactions but not enough to require full accrual basis accounting.
What Other Accounting Methods are Available?
There are two other commonly used accounting methods for nonprofits: accrual basis accounting and cash basis accounting. For more about the differences between cash basis, accrual basis, and modified cash basis accounting, visit this article: