For an example of the application of the ‘cash allocation basis’, see the companion article Example: The City of Toronto 2023 budget using the ‘cash allocation basis’ of budget accounting.
The new ‘cash allocation basis’ of budget accounting would allocate cash to three basic groupings: external revenue allocations, external expense allocations, and internal capital allocations (internal cash transfers). The current ‘modified cash basis’ allocates cash to only two basic groupings: revenue allocations and expenditure allocations. This causes conflations and distortions. Let me explain.