Purchase Solution

What type of business prefers the cash basis of accounting?

Not what you're looking for?

Ask Custom Question

Although many business entities either prefer or are required to use the accrual method of accounting, there are certain businesses where cash basis works best.

Give four examples when cash basis is an appropriate method of accounting.

Purchase this Solution
Solution Summary

The solution cites four types of businesses where cash basis is preferred and even an acceptable method of accounting.

Solution Preview

1. Individuals and very small, closely held companies tend to use the cash basis. These entities have a limited number of financial statement users (banks, mortgage companies), and often don't have trained employees for accrual ...

Purchase this Solution
Free BrainMass Quizzes
Motivation

This tests some key elements of major motivation theories.

Business Processes

This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.

Writing Business Plans

This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.

Social Media: Pinterest

This quiz introduces basic concepts of Pinterest social media

Academic Reading and Writing: Critical Thinking

Importance of Critical Thinking

View More Free Quizzes
Related BrainMass Solutions

  • Cash and Accrual Accounting

    116079 Cash and accrual accounting What is the difference between cash and accrual accounting? Which basis of accounting do most companies use, cash or accrual? Why? Which method is approved by GAAP? Why? Which method does the IRS prefer?

  • Select accrual or cash basis accounting for new business

    Provided the basis of accounting makes sense when considering the nature of the business, an owner preference could certainly be accommodated. 5. The legal form of the organization can sometimes dictate the basis of accounting.

  • Accounting Principles: Cash vs Accrual; Deferred Revenue

    152147 Fundamental Accounting Principles: Cash vs Accrual; Deferred Revenue 1. What is the difference between cash basis and accrual basis accounting? a.

  • Game Theory

    Since, Player A prefers Accounting to Finance, he will vote in favor of Accounting. Player B prefers Finance to accounting and will vote for Finance. Player C prefers Accounting to Finance and will vote for Accounting.

  • Currency Swaps: Terms of Spread

    Assume a maturity of 7 years. If a swap intermediary fee is 30 basis points (US$) and both (A) and (B) gain 20 points from the swap, what are the terms of the spread? Show all payments! See attached file.

  • Government and Nonprofit Accounting

    activities in one column and all business-type activities in another column using the full accrual basis of accounting for both columns. 8.

  • Difference between Cash Basis and Accrual Basis of Accounting

    What experience, if any, have you had with these bases of accounting? The major difference between the cash basis and the accrual basis of accounting is reflected by the way each method recognize revenue and expenses.

  • Government Financing

    of cash flows for proprietary funds. 4) FASB, because they are prepared in accordance with GAAP accrual basis of accounting, not the modified accrual basis of accounting.

  • Accrual basis accounting & the cash basis accounting

    302021 Accounting Equations: will you prefer the accrual basis accounting or the cash basis accounting? 1. You have started a sole-proprietorship business. It is a department store selling groceries.

  • A comparison of Government accounting practices

    For profit accounting uses accrual accounting which recognizes income and expenses when they occur, regardless of when the cash exchange actually happens. Government accounting tends to operate in a cash accounting basis.

View More Related Solutions