Connect Access Card for Financial Accounting: Information and Decisions
8th Edition
ISBN: 9781259662966
Author: John J Wild
Publisher: McGraw-Hill Education
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Concept explainers
Textbook Question
Chapter 3, Problem 1DQ
What is the difference between the cash basis and the accrual basis of accounting?
Expert Solution & Answer
Summary Introduction
Concept introduction:
Accounting is done either on the cash basis or the accrual basis. Under the cash basis of accounting, the transactions are recorded only based on the movement of cash. Under the accrual basis of accounting, the transactions are recorded on the accrual basis, which may be in cash or not.
To indicate: the difference between the cash basis and accrual basis of accounting.
Explanation of Solution
The difference between the cash basis and accrual basis of accounting is explained as follows:
- Under the cash basis of accounting the cash receipts are considered as revenue and cash payments are considered as expenses and net income is calculated on a cash basis.
- Under the accrual basis of accounting, the revenue and expenses are recorded on an accrual basis irrespective of the cash transactions and net income is calculated on an accrual basis.
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What is the difference between cash accounting and accrual accounting?
Chapter 3 Solutions
Connect Access Card for Financial Accounting: Information and Decisions
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