Premium Essay

Week 3 Accrual and Cash Xacc/290

In:

Submitted By olivia293
Words 250
Pages 1
Accrual and Cash Accounting
10/18/2015
XACC/290

Accrual and cash accounting are both beneficial to businesses; however, there are different reasons to you each one. Cash accounting is mostly used by small businesses and for personal finances. Cash accounting keeps track of money only when it is received and paid out. It does not recognize any accrued revenues or expenses because cash was not paid during a period. Accrual accounting keeps track of money when it is earned even if cash has been received yet; it also keeps track of expenses and services when they are incurred even if no money has been paid. Companies are allowed to use cash based accounting for internal purposes and some small businesses are allowed to use cash based accounting when filing for taxes. Otherwise businesses are not allowed to use the cash based accounting because it goes against the GAAP because it doesn’t reflect the company performance or financial status. It also violates the matching principle and time period principle. The Accrual method is preferred because it gives a better picture of how the company is doing financially to give the company a better picture of what they need to do to improve.

References
Accounting Coach. (2004-2015). Retrieved from http://www.accountingcoach.com/blog/cash-basis-accrual-basis-of-accounting
Cash Basis Accounting. (2015). Retrieved from http://www.myaccountingcourse.com/accounting-dictionary/cash-basis-accounting
University of Phoenix. (2015). Financial Accounting. Retrieved from University of Phoenix, XACC/290

Similar Documents

Premium Essay

Mrs Sedigheh

...Course Syllabus School of Business XACC/290 Version 1 Principles of Accounting I Copyright © 2013 by University of Phoenix. All rights reserved. Course Description This course covers the fundamentals of financial accounting as well as the identification, measurement, and reporting of the financial effects of economic events on an enterprise. Students will learn to examine financial information from the perspective of management. Other topics include decision-making, planning, and controlling from the perspective of a practicing manager. Policies Faculty and students will be held responsible for understanding and adhering to all policies contained within the following two documents: • University policies: You must be logged into the student website to view this document. • Instructor policies: This document is posted in the Course Materials forum. University policies are subject to change. Be sure to read the policies at the beginning of each class. Policies may be slightly different depending on the modality in which you attend class. If you have recently changed modalities, read the policies governing your current class modality. Course Materials Kimmel, P. D., Weygandt, J. J., & Kieso, D. E. (2011). Financial accounting: Tools for business decision making (6th ed.). Hoboken, NJ: John Wiley & Sons. All electronic materials are available on the student website. Week One: Basic Accounting Principles and Concepts Details Due Points Objectives...

Words: 2112 - Pages: 9