![]() I would love to keep talking about cash vs. So what is the point of including the complexity of accrual accounting when there is technically an easier route via cash basis accounting? Accrual accounting makes absolutely sure that your financial data is creating a true and accurate image of your company and that they provide deeper insight into your financials by allowing you to see trends in your numbers. Therefore in accrual accounting income is recorded when it is earned (not when cash or a check is received) and expenses are recorded when there has been a transfer of service / value (not when the cash is spent or a bill is paid). Accrual accounting aims to make up for the shortfalls of cash accounting’s method by creating a more true representation of reality by centering around the idea of service and / or value transfer (instead of cash transfer). Now say it with me, enter… accrual accounting. However, this simple “cash in, cash out” record-keeping style rarely paints an accurate picture of the health and profitability of your business because it doesn’t show what is truly being earned or spent each month. And when cash is spent, an expense is immediately recorded on your books. In cash accounting when you receive cash, income is immediately recorded on your books. This is simply too important a concept not to. And that is the difference between cash and accrual accounting. ![]() We’ve talked about it many times before, in our blogs on Understanding Accrued Expenses and Do You Need a Bookkeeper or an Accountant?, to name a few instances, and we’re going to talk about it again before we get to our main discussion of prepaid expenses.
0 Comments
Leave a Reply. |
Details
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |