ACC 280 WEEK 2 DQ 2 - Accrual basis Pro more accurate and...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Week 2 Which basis of accounting do most companies use, cash or accrual? Why? Which method is approved by GAAP? Why? What are the positives and negatives of each? Is it legal for an organization to keep two sets of accounting records; one for tax and one for book? Why or why not? What transactions might fall under a dual method?
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Only really small businesses like 'mom and pop' stores use the cash basis. Most everyone else uses the accrual basis . (Large businesses/corporations are REQUIRED to use the accrual basis under GAAP rules). The accural basis provides a more accurate 'picture' of an entity's financial status . Cash basis: Pro - easier than accrual basis Con - less accurate as far as meaningfulness of assessing financial status and performance
Background image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Accrual basis: Pro - more accurate and meaningful information as re: financial status and performance Con - more work is required (adjusting entries and such) Your check book is a Cash basis financial report. No business would know how it's doing if it relied solely on its check book. That's why all companies use Accrual accounting, and it is required under GAAP. The only thing positive about cash basis of accounting is its simplicity. A trial balance is simply a listing of all account balances at month end, before monthly accruals and other adjustments are made. After posting such adjustments, a new listing is called an Adjusted TB....
View Full Document

{[ snackBarMessage ]}

Page1 / 2

ACC 280 WEEK 2 DQ 2 - Accrual basis Pro more accurate and...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online