GFS Accounting Rule 1: Time of recording

GFS follows essentially the principle of cash accounting, meaning that transactions are recorded when cash is paid or received. Thus, the only types of transactions recorded in the GFS are those that involve exchange of cash for goods or services, or cash only.

However, GFS is not kept entirely on a cash basis. Included are the recording of (i) certain transactions where no cash is exchanged. These transactions are government purchases of goods and services paid for in debt instruments and redemptions of government borrowing in lieu of tax payments, (ii) some transactions in kind and arrears in memorandum items, and (iii) government debt stocks.

Nevertheless, GFS is essentially a cash based system while SNA (and BOP) are recorded on an accrual basis. This reflects the different purposes and use of the two systems, the fact that most governmental accounts are on a cash basis, and the preference in GFS to avoid estimations and implementations. The difference between cash and accrual accounting affects not only the time at which transactions are recorded, but also the range of flows and stocks that are recorded, e.g., transactions in kind, internal transactions, arrears, depreciation, write offs and capital gains/losses.