Week 3 DQ 2 - reasons behind my decision is based on the...

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What is the difference between the cash basis of accounting and the accrual basis of accounting? Which one would you select for a company that has inventory and why? Does the size of the company make a difference? Explain how. What would be the advantages and disadvantages of using one basis of accounting over the other? The difference between the cash basis and the accrual basis is simply in the timeframe for which they are reported. Cash basis accounting, records the expenses and the sales at the time the cash changes hands. Accrual basis accounting, records the expenses and the sales at the time of the transaction. Personally, I would chose the Accrual basis accounting system for use in my business. The
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Unformatted text preview: reasons behind my decision is based on the assumption that I need to know the sales trends and I need to have the accurate data in order to properly stock the necessary inventory to meet the customer demands. It is possible to have customer that are on various payment schedules. Some may be on net30, some on net45, and still others that pay for the product at the time of the order. Because of the different repayment schedules, I believe that it would be easier to track the expenses and sales at the time of the transaction, not when the money changes hands. I do not believe that in this scenario the size of the company would matter. It still needs to be based on the same principle....
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This note was uploaded on 12/13/2011 for the course ACCOUNTING ACC 280 taught by Professor Kenfredrickson during the Spring '09 term at University of Phoenix.

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