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Selling Assets to Yourself to Balance the Budget Fund accounting and the modified accrual basis of accounting are the methods used in accounting for government operations. While they are very useful in that they more accurately reflect how governments function, they also can be used to facilitate some very unorthodox financing schemes. Governments use the modified accrual method in accounting for revenues and expenditures. That is to say that they use a near cash basis of accounting that treats most cash inflows as if they were the equivalent of revenues. In addition in the interest of inter-period equity these revenues and expenditures must balance in each fiscal year. Fund accounting exacerbates the problem by allowing governments to transfer resources between funds, while treating them as revenues. Governments have taken advantage of these accounting peculiarities to develop some very creative means of balancing their budgets that at best accomplishes nothing and at worst succeeds in deferring the problem to future generations of taxpayers (with interest added of course). One