Question

state any two advantages of cash of basis of accounting​

Answer 1

Answer:

• Simple: As a business, you have to choose one of the accounting methods. If you choose this accounting, it’s the simplest because you will only record transactions that are related to cash. Other transactions won’t be taken into consideration.

• Maintenance is easy: Maintaining an accrual system of accounting is tough. Compared to that maintenance of cash accounting is pretty easy. You will record revenue when cash is received from customers and you will record expenses when cash is paid to suppliers.

Answer 2

Answer:

Liquidity: Since it is all about only cash transactions, the potential investors who would like to invest in the business doesn’t need to go through any liquidity ratio. S/he can look at the accounting system, look at the cash inflow and cash outflow and then find out for herself/himself the net cash flow of the business.

Single-entry accounting: This is single entry accounting. That means the effect occurs only on one account. It makes things easier for the business and the business also doesn’t need to follow the matching concept.