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Week Three Accrual and Cash Basis
Bi-Le’ DeRouen
ACC/290
November 1, 2012
Dana Babin

Week Three Accrual and Cash Basis Both cash basis of accounting and accrual basis of accounting can be the best of both worlds when using software. However to prefer one over the other to ensure the most advantage way can be a bit of a trick. Determining the differences between the two bases will be established. In the event an accountant decides accrual basis over cash basis he or she understand transactions that charge an organization’s financial statements are recorded in the time period in which the events occur, even if currency was not received. Receivables are recorded if payment is not received at the point of sale, revenues and expenses will be recorded in full, payables are recorded whether payment is made or not at the purchase time, and it is important to know that organizations and companies recognize expenses when incurred. Compared to cash basis accounting, companies and organizations record revenue only when currency is received, and also recording expense when cash is salaried. When using cash basis the accountant is not to record expense when incurred nor is he or she to record revenue when earned. The cash basis is prohibited under (GAAP) generally accepted accounting principles (“Understanding Cash and Accrual Basis Accounting “, 2012). Cash basis can be quicker and easier to use versus accrual. It is very simple, when funds are available to pay bills checks are only written, expense is recorded as of the date on the check, never the less of when the expense was incurred. There is hardly to any effect made to match any revenues to the period of time that is earned. The most important focus of a cash basis is the cash amount in a bank, and the second important focus is insuring all the bills are paid. Accrual basis is less complex than cash basis

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