Question

Advantage and disadvantages of receipt and payment account

Answer 1

hyy friend here is ur answer.
.
.
.
.
Advantages &
Disadvantages
of the Cash
Receipts &
Disbursements
Method
------_----_-_--------
The cash receipts and disbursements
method is a budgeting process.
Companies use actual information
for cash collections and payments to
create a budget. In some cases, a
company can even use this process to
create income statements and other
reports for future use. Companies
must weigh the advantages and
disadvantages of this method to
determine its usefulness for them.
Accurate
Using the cash receipts and
disbursements method provides
more accurate reporting. The ability
to use actual cash receipts and cash
payments provides better
information on a company’s cash
use. In some cases, a company may
operate under the cash basis
accounting method to ensure the
cash information is accurate. This
accounting method only records
transactions when cash changes
hands. Accurate cash balances
typically provide more assurance a
company does not have cash poor
operations.
Increased Control
Budgets typically are business tools
that provide constraints on a
company’s operations. Using actual
cash receipts and payments place the
greatest restraints on freewheeling
managers who overspend capital.
The budget usually has no room for
excess because actual cash balances
allocate all resources to a
department. Increased control
through the cash receipts and
disbursements method can improve
profitability.
Short Periods
The cash receipts and disbursements
budget only works well for a short
period. In most cases, any budget
using this method will last no longer
than six months. Short periods result
in companies spending more time
creating budgets. Time spent on the
budget process means a company has
less time to complete normal work
activities, potentially reducing
profitability.
Difficult to Manage
Cash accounting and cash-based
budgets can be difficult to manage.
More time is necessary to ensure
accuracy and relevance for the
budget. Accounting departments may
need to provide at least one worker
to complete the cash receipts and
disbursements budget. More
oversight may also be necessary to
ensure managers and others do not
manipulate the budget, creating
distortions in the data. Operational
changes can also have significant
effects on the budget, as the company
must account for the changes in real
cash terms.
.
..
.
.
.
.
if u like my answer then mark as brainliast
..
.
.
.
and follow me for more
...
.
.
#ar