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Accounting methods: Differences in cash and accrual basic

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A company will need to choose an accounting method. What are the differences between the cash basis of accounting and the accrual basis of accounting? When are income and expenses recognized under each method?

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Solution Summary

Your tutorial is 208 words and explains in simple, clear, everyday language and includes an example of the profit computed both ways so you can get the idea.

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Accrual basis of accounting reports revenues when the service is provided or the goods delivered to the customer, not when the payment is received for the goods/service.

Accrual basis of accounting reports expenses when the asset is used up or when the services are consumed in the operating of the business.

Cash basis of accounting reports revenues ...

Solution provided by:
Carol Sargent, PhD
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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