Accrual Method
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Accrual Method Checkpoint
Candace Fralix
January 25, 2011
HSM/260
Accrual and cash basis are both used in keeping up with a business’s income and expenses. The cash method is used more than the accrual in small businesses. In using the cash method income is not counted until the cash is received. The expenses are not counted until they are paid.
Under the accrual method the transactions are counted when the order is made, received, and services occur regardless if money is actually received. Accrual accounting is important because it shows income and debt more accurately.
Revenue does not equal cash in an accrual system. The reason being is that the cash account depends on the receipt of the revenue. The revenue is related to the cash basis, and in an accrual system it is not related. In an accrual system the revenue is based on the period in which they are earned.
The statement of cash flow is the final document in the financial report. This document provides information from the Income Statement, Owner Equity Statement, and the Balance Sheet. This report is important to businesses because it holds so much information on that business. Some of the items that can be found on this document are:
1. Net earnings
2. Depreciation expense
3. Changes in inventory
4. Changes in accounts receivable
5. Changes in accounts payable
6. Changes in net cash from financing
Money Instructor. 2002-2009. Basic Accounting: The Importance of the Cash Flow Statement. Retrieved from www. moneyinstuctor.com
Reference:
Money Instructor. (2002-2009). Basic Accounting: The Importance of the Cash Flow Statement. Retrieved from http://www.moneyinstructor.com
NOLO Law for All. (2011). Cash vs. Accrual Accounting. Retrieved from http://www.nolo.com
Candace Fralix
January 25, 2011
HSM/260
Accrual and cash basis are both used in keeping up with a business’s income and expenses. The cash method is used more than the accrual in small businesses. In using the cash method income is not counted until the cash is received. The expenses are not counted until they are paid.
Under the accrual method the transactions are counted when the order is made, received, and services occur regardless if money is actually received. Accrual accounting is important because it shows income and debt more accurately.
Revenue does not equal cash in an accrual system. The reason being is that the cash account depends on the receipt of the revenue. The revenue is related to the cash basis, and in an accrual system it is not related. In an accrual system the revenue is based on the period in which they are earned.
The statement of cash flow is the final document in the financial report. This document provides information from the Income Statement, Owner Equity Statement, and the Balance Sheet. This report is important to businesses because it holds so much information on that business. Some of the items that can be found on this document are:
1. Net earnings
2. Depreciation expense
3. Changes in inventory
4. Changes in accounts receivable
5. Changes in accounts payable
6. Changes in net cash from financing
Money Instructor. 2002-2009. Basic Accounting: The Importance of the Cash Flow Statement. Retrieved from www. moneyinstuctor.com
Reference:
Money Instructor. (2002-2009). Basic Accounting: The Importance of the Cash Flow Statement. Retrieved from http://www.moneyinstructor.com
NOLO Law for All. (2011). Cash vs. Accrual Accounting. Retrieved from http://www.nolo.com