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    Evaluating sales staff: cash or accrual accounting method?

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    Revenue on an accrual-accounting basis must be both earned and realized before it is recognized in the income statement. Revenue in cash-basis accounting must be received in cash.

    Is an accrual-basis or cash-basis recognition of revenue more relevant for evaluating the performance of a sales staff? Why?

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    Solution Preview

    Performance of a sales staff should be judged based on what they sell. The collection of accounts receivable of what they sell is mostly beyond their control. Therefore, it is not fair to judge the sales staff's performance based on ...

    Solution Summary

    The solution explains the preferred method used to evaluate sales staff, but also points out some issues related to that treatment. An example gives a possible solution.