Cash and accrual accounting  Essay example
High school
Essay
Finance & Accounting
Pages 5 (1255 words)
Download 0
Name: Professor: Course: Date: Introduction The goal of the company is to have a profitable business that maximizes the profit, and make sure they prepare and keep their financial report. There are two significant accounting techniques that are utilized to maintain recording of the business…

Introduction

Meanwhile, accrual basis is accounting techniques that transactions are recognized when item is delivered, and revenues are recorded when they are earned. Although, the two methods are both accounting method and used to record transactions, they are different in various ways and the paper will evaluate the difference of the two accounting methods used to recognize transactions. Cash vs. accrual accounting Accrual-basis financial statements give more practical information than cash-basis statements because the accrual-basis is a method that is recognized by the generally accepted accounting principles (GAAP). However, the cash basis statement is not useful as accrual basis because it is not recognized by the GAAP. Meanwhile, the accrual basis ensures firms have recorded transaction in the period that the event has occurred. For instance, to establish the net income it will require the company to recognize revenue when it was earned but not when it received the cash. Meanwhile, the company under the accrual basis will recognize the expenses at the period when they are incurred and not the period when they are paid. Conversely, the companies that use cash basis accounting can record revenues when they get cash, and record an expense when they pay out cash. ...
Download paper
Not exactly what you need?

Related papers

Accounting: Internal Cash Control
These modifications in our company’s policy with regard to internal cash control shall help us keep track of our most liquid asset. Firstly, it is recommended that checks should only be signed by the treasurer. Duties should be segregated so that the purchasing agent should only be given the responsibility to approve arrival of goods. Payment and record keeping should be done by the treasurer.…
Cash vs. Accrual Accounting and Balance Sheets
With the help of the cash accounting method any organization can identify its exact cash flow, provided if the company has entered each and every transaction in the account. Cash accounting method is comparatively easy to perform. Accrual basis accounting is the process where the transactions are taken into consideration once the order is made, the product is distributed, and service is provided.…
Cash vs. Accruals: Is There a Difference in Recognizing Transactions?
Such incorporation of monetary value can be done on either cash or accrual basis. This paper seeks to investigate the differences between cash and accrual recognition of transactions. The paper will explore elements and principles that are involved in the two approaches to recognition. Cash method The cash approach to accounting recognizes transactions when money is transferred between parties. A…
Statements of cash flows
This explains why bank overdrafts are not part of financing activities. Additionally, the information presented on cash flow of IFRS is quick and easy to flow. Each entity is supposed to present cash flow statement in such a way that it gives an appropriate reporting of financing activities, investing, and operating. For instance, during the investing activities, it is expected that the firm…
FINANICAL MANAGEMENT IN NONPROFIT ORGANIZATION
The report is prepared with the sole intent to study the various financial management practices in a non-profit organization. The author of the study will highlight the various financial management practices that ensure smooth operations of the business. It also highlights the difference in the financial management practices between profit and nonprofit organizations. The author of the study will…
Financial Accounting coursework
Thus the accrual method of accounting measures the position and performance of the company based on the transactions made in the course of business irrespective of the cash receipts and payments done for the business transaction. The accrual method of accounting combines the current and expected cash inflows and outflows to determine the consolidated financial position of the company (Sofat and…
accounting ethics, pertaining to disclosure and conflict of interest
With the increasing complexity of the modern business environment, many accounting related topics in ACC 40A is under scrutiny now. This paper will evaluate some key current accounting related topics in ACC 410A that are of considerable importance in the present business context. Time value of money is a key aspect of accounting because every business transaction is recorded in terms of monetary…