What are the two bases of accounting?
Answers
Answer:
A basis of accounting is the time various financial transactions are recorded. The cash basis (EU VAT vocabulary cash accounting) and the accrual basis are the two primary methods of tracking income and expenses in accounting.
Answer:
The two types of accounting that most businesses use are the accrual-basis and cash-basis method.
Explanation:
Some businesses use the modified cash-basis method, which combines principles from both the accrual- and cash-basis methods.
While each method of accounting records assets, liabilities and equity, they differ on when each is recorded, thus impacting the financial snapshot of a business at any given point.
The three primary components of the basic accounting formula (which must balance at all times) are as follows:
Assets: Assets refer to tangible and intangible assets of a business, such as cash, land, inventory, buildings, accounts receivable, investments and other financially viable items. Assets equal liabilities plus equity.
Liabilities: Liabilities refer to the financial obligations of a business to pay its creditors for accounts payable, accrued wages and loans.
Equity: Owner's equity or shareholders equity refers to the profits available. Equity plus liabilities equal assets.
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