Acct412

Acct412 - 03 July 2011 Module 1, Group 3 DB1 Reply RE:...

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03 July 2011 Module 1, Group 3 DB1 Reply RE: Explain how the different accounting methods can affect a taxpayer’s taxable income. The Internal Revenue Service can also tell a business which accounting method it will use. They would only exercise this right if the method that is used is not “clearly reflects income” (Willis, Hoffman, Maloney, & Raabe, 2010). Deciding which method to use is not easy. According to Alexander, the cash basis’ accounting method marginally trails late compared to accrual basis’ accounting (Alexander, 1999). The cash basis’ accounting method will recognize revenue and expenses when paid. This method will show what one has in revenue and expenses at any moment in time. Its down fall is that it will not show receivable that are still owed. This method could show that a business is most profitable. This is apparent because it does not use all of the sales and revenues together. The accrual method is good for businesses that have an established customer base.
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This note was uploaded on 07/18/2011 for the course ACCT 412 taught by Professor D during the Spring '11 term at Lee.

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Acct412 - 03 July 2011 Module 1, Group 3 DB1 Reply RE:...

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