Which accounting basis cannot be used to demonstrate the concept of interperiod equity?

Interperiod equity is a fundamental concept in governmental accounting that ensures that current year revenues are sufficient to cover the current year's expenses, so that future generations do not bear the burden of current expenditures. This concept is best demonstrated through accounting methods that allow for the matching of revenues and expenses over the periods they occur.

The cash basis of accounting recognizes revenues and expenditures only when cash is actually received or paid. This method does not capture the timing of when revenues are earned or when expenses are incurred; therefore, it does not allow for a proper assessment of interperiod equity. If revenues and expenses are recorded only when cash changes hands, it can create a misleading financial picture that does not accurately reflect the government's financial obligations and available resources over time.

In contrast, both the accrual basis and modified accrual basis allow for the recognition of revenues and expenses when they are incurred, regardless of cash transactions. This ability to align revenues and expenses more closely with the period they relate to makes these methods more effective for analyzing interperiod equity. Fund accounting basis, while it's a method specific to government entities, can also accommodate interperiod equity assessments through its structured approach to managing resources.

Thus, the cash basis is not equipped to demonstrate interperiod equity effectively, as it lacks the