Question

Mr Hari had started a new mid-sized business he being new to accounting sought advice from a chartered accountant. on maintenance of accounts he was advises that he should follow double entry system of accounting maintaining accounts on accrual basis some of his friends advises him to a mentor accounts on cash basis of accounting. he decided to follow the advice of the chartered accountants justify the decision of Mr Hari?​

Answer 1

Explanation:

The decision of hariharan to maintain accounts on double entry system of accounting following accrual concept is correct because when account are maintaine on accrual based double entry system of accounting , coorect income expenditure, liabiliteis and assets are shown in the financial statements. It is important to know the correct income, expenditrue, liabliiteis and assets as it enables the businessman to plan his finances .Had he followed cahs basis of accounting the business would not have shown correct financial performance and financial position as credit transactions would not have been recorded.

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Answer 2

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