Answer To Question On Cash Versus Accrual Accounting

November 11th, 2008 Comments off
Share |

Earlier topic on accruals concept and profit versus cash concept refers.

Basically, a majority of small businesses use the cash method of accounting since it is simple to understand.

  • The business records the earnings only when the cash is received and records all its expenses when the check or cash is issued. [ Payments are considered made when they are mailed and also includes payment by credit card].
  • One may use a combination of the cash method and accrual method if this combination clearly shows his or her income and expense transaction and is used consistently.
  • However the business owner cannot switch between cash, accrual or combination accounting.

   Answer to Cash versus Accrual accounting question

Jim Co

 

Accrual Accounting

Cash Accounting

Revenue

10,000

8,000

 

 

 

Rent expense

2,000

2,000

Wages expense

1,600

1,200

Utilities expense

700

700

Repairs expense

500

Stationery expense

200

Miscellaneous expenses

100

100

Net Profit or (Loss)

4,900

4,000

 

[refer to MORE articles on accounting concepts]

 

 

Comments are closed now.

Financial Accounting

 
 

Advertise Here | Brain Teasers/Puzzles | Greeting Cards | Inspirational Quotes | Jokes/Humor | Useful Links | Motivational Stories | Resource | Shopping | Share/Express Your Views | Testimonials | Universities/Colleges | Words of Wisdom from Religions | FREE POSTING OF ACCOUNTING & FINANCE JOBS VACANCY|