What type of accounting is primarily used by governments?

Government accounting primarily utilizes cash accounting, which focuses on recording revenues and expenses when cash is actually received or paid. This approach allows governments to easily track their cash flows and ensures that they only account for transactions that have a tangible impact on their current financial situation. The simplicity of cash accounting suits many governmental practices, as it aligns closely with the budgeting processes and cash management techniques necessary for public administration.

While accrual accounting is beneficial for understanding long-term financial health by recording revenues and expenses when they are incurred, it is not the predominant method for governmental accounting. Double entry accounting, which records each transaction in at least two accounts to maintain the accounting equation's balance, is more common in private businesses. Maintaining only a cash-based ledger would imply a lack of deeper financial tracking that cash accounting incorporates, making it less comprehensive in the context of government financial reporting.