Question

This basis of accounting is simple and may be sufficient and suitable for some small 4 businesses. Firms using this approach record revenue when they receive cash and record expenses when the pay cash.
From the above paragraph answer to the following.
(i) Identify the „Basis of Accounting‟
(ii) Name the alternative approach to the identified approach and mention ant three differences between those.

Answer 1

Explanation:

The basis of accounting mentioned her is to record each and every cash transaction that is make a log when the cash goe out and when it comes in the business.

The alternate and more professional approach is cash flow statement prepartion.

The main sections of the cash flow statement are:

1. Operating activities

2. Investing activities

3. Financing activities

4. Disclosure of noncash activities