We use cookies to give you the best experience possible. By continuing we’ll assume you’re on board with our cookie policy

See Pricing

What's Your Topic?

Hire a Professional Writer Now

The input space is limited by 250 symbols

What's Your Deadline?

Choose 3 Hours or More.
Back
2/4 steps

How Many Pages?

Back
3/4 steps

Sign Up and See Pricing

"You must agree to out terms of services and privacy policy"
Back
Get Offer

Cash Basis and Accrual Basis of Accounting

Hire a Professional Writer Now

The input space is limited by 250 symbols

Deadline:2 days left
"You must agree to out terms of services and privacy policy"
Write my paper

1. Under cash basis of accounting, revenue and expense recognition would occur when cash is received and disbursed. Contrast cash basis of accounting with accrual basis. Give suitable examples. ACCRUAL BASIS OF ACCOUNTING – An accounting basis wherein revenue and expenses are recorded in the period in which they are earned or incurred regardless of whether cash is received or disbursed in that period. This is the accounting basis that generally is required to be used in order to conform to generally accepted accounting principles (GAAP) in preparing financial statements for external users.

Don't use plagiarized sources. Get Your Custom Essay on
Cash Basis and Accrual Basis of Accounting
Just from $13,9/Page
Get custom paper

CASH BASIS OF ACCOUNTING – The accounting basis in which revenue and expenses are recorded in the period they are actually received or expended in cash. Use of the cash basis generally is not considered to be in conformity with generally accepted accounting principles (GAAP) and is therefore used only in selected situations, such as for very small businesses and (when permitted) for income tax reporting.

In simpler terms, Accrual Basis accounting will record an item as an expense if a firm incurs debt that is to be paid off at a later date; it will likewise assume an item as revenue if a counter party agrees to pay the firm on a later occasion.

This is unlike the Cash Basis Accounting method, which ignores pending inflows and outflows of cash and instead records them when cash is received and paid out. To put it as simply as possible, accrual accounting adds income as it’s accrued (earned) Cash basis doesn’t add income until it is actually received.

If a company gives a customer a product that they will actually pay for later, the income is entered into their accounting ledger even though payment has not yet been received. This is accrual accounting. It has the advantage of tracking upcoming expenses and income for better future planning. In Cash Basis all accounting is done strictly on the actual movement of cash or cash value in an account. It is simpler and does not recognize promises to pay or debts owed as either expenses or income.

Cite this Cash Basis and Accrual Basis of Accounting

Cash Basis and Accrual Basis of Accounting. (2018, Feb 21). Retrieved from https://graduateway.com/cash-basis-and-accrual-basis-of-accounting/

Show less
  • Use multiple resourses when assembling your essay
  • Get help form professional writers when not sure you can do it yourself
  • Use Plagiarism Checker to double check your essay
  • Do not copy and paste free to download essays
Get plagiarism free essay

Search for essay samples now

Haven't found the Essay You Want?

Get my paper now

For Only $13.90/page