Order Now Order Now
Login / SignUp
Order Now

Home Free Essays

>>

All Subjects

>>

Education

>>

Accounting Cycle

Accounting Cycle

Download

Accounting Cycle

[Name of the Writer]

[Name of the Institution]

Accounting Cycle

Cash basis and accrual basis are two different methods which are used in accounting to record accounting transactions. Cash basis is the method in which revenue is reported on the income statement when the cash is received from customers and expenses are recorded when the invoice is paid out. It is usually preferred by small enterprises and also for personal finances (Jeppson et al., 2016). Accrual basis is the method in which revenue is recorded when a company earns some cash and expenses are recorded despite no cash being paid out. Large enterprises prefer it for several aspects (Marti, 2016). Both methods are dependent on the timing of expenses and revenues.

For example, a company sells products of about 2000 dollars to a customer in June, and the customer clears the payment in September. According to the cash basis, a company will record their revenue in September when a customer will pay all the payment, and according to the accrual basis, a company will record its revenue in June when they sold the products to the customer without receiving the payment. Similarly when a company buy products of 1000 dollars in June and pay the invoice in September. According to the cash basis, the buyer will record the expenses in the month of September, when a company pays the bills, and according to an accrual basis, the buyer will record the expenses in the month of June, when a company receives a supplier's invoice.

It is very important for every company to adjust entries in the general ledger because they are necessary for creating a company’s balance sheet and income statement. Before a company prepares its financial statement, adjusting entries are made to make sure that the company's financial records are according to revenue recognition. The adjusting entries in a general ledger are critical because some times all transactions are not documented accurately which may affect the whole revenue and expenses of a company.

References

Martí, C. (2016). Accrual Budget. Global Encyclopedia of Public Administration, Public Policy, and Governance, 1-6.

Jeppson, N. H., Ruddy, J. A., & Salerno, D. F. (2016). The statement of cash flows and the direct method of presentation. Management Accounting Quarterly, 17(3), 1.

More Subjects

Education

(5614)

English

(2294)

Business And Management

(1760)

Healthcare And Nursing

(1684)

Psychology

(929)

History And Anthropology

(743)

Sociology

(572)

IT

(446)

Education

(429)

Finance, Accounting And Banking

(419)

Philosophy

(347)

Political Science

(310)

Law And International Law

(308)

HRM

(300)

Economics

(288)

Biology And Life Sciences

(267)

Literature

(249)

Marketing And PR

(238)

Culture

(140)

Environmental Science

(109)

Geography

(92)

Statistics

(64)

Maths

(53)

International Relations

(44)

Physics

(30)

Chemistry

(25)

Capstone

(8)

Project Management

(8)

Reflective Thinking

(7)

Critical Review

(3)

Linguistics

(3)

Critical Appraisal

(2)

BUS 2090

(2)

English 12 Drama

(1)

Business Information Technology

(1)

Operational Plan

(1)

Corporate Finance

(1)

L2 Photography And Design

(1)

Food Nutrition

(1)

Leadership

(1)

Nursing

(1)

MBA

(1)

Social Enterprise Project

(1)

Government

(1)

Our tools

Essay typer Grammar Checker Plagiarism Checker Citation Generator

Useful Links

Free Essays About Blog

Contact me

info@freeessaywriter.net

If you have any queries please write to us

Join our mailing list

Invalid Email Address!
Thank you for joining our mailing list

Please note that some of the content on our website is generated using AI and it is thoroughly reviewed and verified by our team of experienced editors. The essays and papers we provide are intended for learning purposes only and should not be submitted as original work.

@ All Rights Reserved 2023 info@freeessaywriter.net

Privacy Policy Terms of Service Use Contact
Back to top