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Of accounting is simple and logical this is why

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of accounting is simple and logical; this is why smaller businesses often choose to use it. Cash basis accounting fails recognize the revenue principle and matching principle, which makes it not accepted by the GAAP requirements. In actuality, cash basis accounting is not really effective and according to accounting specialists cash basis accounting does not give a good sense of the financial stability, especially in the long run (Heilbroner & Milberg, 2008). On the other hand accrual basis accounting strictly follows the GAAP guidelines. With accrual basis accounting revenues and expenses are recognized when they are earned and accrued. (Kimmel, Weygandt & Kieso, 2009). Different accounts are created for specific purposes such as, expenditure accounts, payable, receivable, and cash accounts. Accrual accounting guarantees that revenue is recorded when it is earned and realized, regardless
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Cash Basis vs Accrual Basis Accounting 3 when the actual payment is received. Expenses are matched in the similar way.
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