Accruals
Accruals and Cash Accounting
Geraldine Saint Fleur
XACC/290
February 8, 2015
Jennifer Campbell
Accrual and Cash Accounting
This week we learned about accrual accounting concepts. Within this chapter we covered revenue and expense recognition principle, adjusting entries, the purpose of adjusted trial balances, accruals, cash accounting, etc. We will be going over the accrual, cash accounting and cash basis accounting.
Accruals/Cash Accounting
The difference between accruals and cash accounting is the timing when the revenue and expense are recognized. Accrual accounting basis of accounting revenues are reported on the income statement when they are earned—which often occurs before the cash is received from the customers. Expenses are reported on the income statement in the period when they occur or when they expire—which is often in a period different from when the payment is made. The accrual method accounts for revenue when it is earned and expenses goods and services when they are incurred. Under the accrual method a company 's revenue is still recorded rather or not if cash has not be received or expenses have been incurred but no cash has been paid. I found an article that broke it even better which states that Cash Basis consist of cash, check or credit cards only.
Now under the cash basis of accounting, revenues are reported on the income statement in the period in which the cash is received from the customer. Expenses are reported on the income statement when the cash is paid out. The cash method is usually used by small businesses and for personal finances. Accrual Basis consists of in house financing available.
Accepted Accounting Principle
References
Kimmel, P. D., Weygandt, J. J., & Kieso, D. E. (2011). Financial accounting: Tools for business decision making (6th ed.). Hoboken, NJ: John Wiley & Sons.
Geraldine Saint Fleur
XACC/290
February 8, 2015
Jennifer Campbell
Accrual and Cash Accounting
This week we learned about accrual accounting concepts. Within this chapter we covered revenue and expense recognition principle, adjusting entries, the purpose of adjusted trial balances, accruals, cash accounting, etc. We will be going over the accrual, cash accounting and cash basis accounting.
Accruals/Cash Accounting
The difference between accruals and cash accounting is the timing when the revenue and expense are recognized. Accrual accounting basis of accounting revenues are reported on the income statement when they are earned—which often occurs before the cash is received from the customers. Expenses are reported on the income statement in the period when they occur or when they expire—which is often in a period different from when the payment is made. The accrual method accounts for revenue when it is earned and expenses goods and services when they are incurred. Under the accrual method a company 's revenue is still recorded rather or not if cash has not be received or expenses have been incurred but no cash has been paid. I found an article that broke it even better which states that Cash Basis consist of cash, check or credit cards only.
Now under the cash basis of accounting, revenues are reported on the income statement in the period in which the cash is received from the customer. Expenses are reported on the income statement when the cash is paid out. The cash method is usually used by small businesses and for personal finances. Accrual Basis consists of in house financing available.
Accepted Accounting Principle
References
Kimmel, P. D., Weygandt, J. J., & Kieso, D. E. (2011). Financial accounting: Tools for business decision making (6th ed.). Hoboken, NJ: John Wiley & Sons.
References: Kimmel, P. D., Weygandt, J. J., & Kieso, D. E. (2011). Financial accounting: Tools for business decision making (6th ed.). Hoboken, NJ: John Wiley & Sons.