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Benefits of being able to record expenses

1. You stated a good comparison between cash basis accounting and accrual basis. Many accountants believe that the cash basis of accounting fails to match efforts and accomplishments of a company in a manner that measures economic performance and true financial position. For instance, if a bill is received in January for December's telephone bill then should it be recorded as an expense in January when the bill is paid (cash basis) or in December when the expense was incurred (accrual basis). Many accounts will argue that the accrual method provides a clearer financial picture.
What benefits do you see in being able to record the expense as soon as it is earned, rather than waiting until cash is paid?

2. Why do you think a business would want to use Modified Accelerated Cost Recovery System which known as MACRS (apart from being required for new assets) for their tax return?

3. As a manager, knowing that once an asset is fully depreciated it no longer has any depreciation expense, would you want to depreciate your assets as quickly as possible or stretch the expense out over as many years as you can?

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1. You stated a good comparison between cash basis accounting and accrual basis. Many accountants believe that the cash basis of accounting fails to match efforts and accomplishments of a company in a manner that measures economic performance and true financial position. For instance, if a bill is received in January for December's telephone bill then should it be recorded as an expense in January when the bill is paid (cash basis) or in December when the expense was incurred (accrual basis). Many accounts will argue that the accrual method provides a clearer financial picture.
What benefits do you see in being able to record the expense as soon as it is earned, rather than waiting until cash is paid?

The benefits that I see in being able to record the expense as soon as it is earned, rather than waiting until cash is paid. For example, if a bill is sent out to a customer, and he or she pays it immediately, then the company can record that it was paid in full. This definitely lightens the burden for the company as well as the individual for no longer having to deal with the issue that was looming over them for a short or long period of time. Not only that, but businesses like to know that the money is there to pay for expenses, especially when consumers pay them for their goods and services. They are then able to make the necessary payments to keep their facility up and running for long periods of time, rather than cutting hours short in order to remain cost-effective through this entire ...

Solution Summary

This solution discussed the benefits of recording the expense as soon as it is earned, rather than waiting until the cash is paid.

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