Question

Difference between cash basis and accrual basis of accounting

Answer 1

Answer:

KEY TAKEAWAYS

Accrual accounting means revenue and expenses are recognized and recorded when they occur, while cash basis accounting means these line items aren't documented until cash exchanges hands.

Cash basis accounting is easier, but accrual accounting portrays a more accurate portrait of a company's health by including accounts payable and accounts receivable.

The accrual method is the most commonly used method, especially by publicly-traded companies as it smooths out earnings over time.

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