Question

How Cash basis of Accounting Violates GAAP..??​

Answer 1

ANSWER :

Cash basis of accounting violates GAAP as it is not compatible with Matching Principle and does not follow Accrual Assumption under GAAP.

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EXPLANTION :

Cash basis of accounting refers to the basis of accounting under which a transaction is recognised and recorded in the books of accounts only on their actual receipts and payments. In other words, transactions are recorded in the books of account in the accounting year in which case is actually received or paid under cash basis of accounting.

Again, Generally Accepted Accounting principle or GAAP are guide to the accounting profession in the service of accounting techniques and the preparation of financial statements. Assumptions, principles, modifying principles and accounting standards are the elements of GAAP.

• Under cash basis of accounting, an income is not considered to be earned until payment is received and expenses incurred but not paid withim the accounting period are also not considered for ascertaining the profit of that period. Therefore, this method is not compatible with Matching Principle.

• Moreover, incomes are not recorded and recognized when they are earned whether actually received or not and expenses are not recorded when they are incurred as it is done at the time of actual receipts and payments under cash basis of accounting. Therefore, this method does not follow the Accrual Principle.

As the Matching Principle and the Accrual Assumption are the elements of GAAP and the Cash basis of accounting violate these two principle and assumption; hence Cash basis of Accounting violates GAAP.

Answer 2

Yes, cash basis of accounting violates GAAP as it does not follow matching principle and accrual concept.

Cash basis of accounting violates GAAP as it is not compatible with Matching Principle and does not follow Accrual Assumption under GAAP.

Hope it will helps ✌

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Answer 3

Yes, cash basis of accounting violates GAAP as it does not follow matching principle and accrual concept.

Cash basis of accounting violates GAAP as it is not compatible with Matching Principle and does not follow Accrual Assumption under GAAP.

Hope it will helps ✌

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