Accrual And Cash Accounting Essay
Accrual And Cash Accounting
These are two methods of keeping track of income and expenses in a business, (accrual and cash accounting). Accrual and cash accounting difference is in when a sale and purchase are credited and debited to the account. The cash method is when cash is received, and the expense is when it is paid. An example is when I am contracted to paint a room, which will be completed within a couple of hours, the client pays me. After completing the job my client pays me with cash or check. Therefore, it is considered cash accounting and recorded as so. Cash accounting tracks the cash flow but does not track revenue. With accrual accounting, all transactions are recorded if cash is received or not. Most companies use accrual accounting on a weekly basis to monitor cash flow to ensure they have enough cash on hand for the business to operate.
Accrual accounting transactions are, the day they of service. For an example, with my business there are some jobs that I and will be completed, but not paid until later. When it’s a company, their contracts are paid on a monthly basis. For a company these are considered the companies account payable, that arpaid monthly. As for me these are accrual accounts, but arerecorded. “The cash and accrual methods can produce the same,” www.inc.com/articles/2000/04/19194 Cash and accrual accounts can have no difference if all transactions are paid in cash when completed no matter what methods are . Accrual accounting shows the income and debts in partial of a business and cash accounting only shows the cash flow. Each method used together will give a more accurate picture of the company business.
www.inc.com/articles/2000/04/19194.html, Cash vs. Accrual Accounting/Bookkeeping Articles
www.dummies.com, Deciding between Cash-Basis and Accrual Accounting-For Dummies