Question

Q.11 Distinguish Between the following:
(a) Cash Basis and Accrual Basis of Accounting.
(b) Trading Account and Manufacturing Account.

Answer 1

a)

 Difference between Cash basis Accounting and Accrual basis of accounting :

Cash Basis :-

1. transactions are recorded at the time of payment made

2. Only cash receipt and cash payment are recorded.

3. No any credit transactios are recorded.

Accrual Basis :-

1.  transactions are recorded 1st when it occur.

2. cash and credit both transaction are recorded undery this system.

3. Credit transaction are also recorded under this system.

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b)

Trading Account :-

1. Trading account is prepared for purchase and sale of finished goods.

2. Gross profit or Gross loss is calculated in trading account

3. the result gross profit and gross loss is transfered to Profit and loss account.

Manufacturing Account :-

1. Manufacturing account is Prepared to find the cost of goods produced

2. cost of goods is calculated in manufacturing account.

3. Factory expenses are recorded in manufactuing account

Explanation: