Cash basis income statement vs. Accrual basis income statement

asimko_501 · #1 Jan 19, 2008, 05:34 PM

What is the difference between a cash-basis income statement and an accrual-basis income statement? For example, how would I record a cash basis income statement for April, May, and June, if the company started in April? HELP!

delite · Jan 19, 2008, 09:28 PM

Quote:

Originally Posted by asimko_501

What is the difference between a cash-basis income statement and an accrual-basis income statement? For example, how would I record a cash basis income statement for April, May, and June, if the company started in April? HELP!

cash basis accounting does not work well for companies that have inventories, sell on credit,etc, In these instances you will need to use the accrual method of method.The effect the accrual will have over the cash method is that the accrual more accurately reflects the company's true financial position. For financial purposes most lending instituitions will require the accrual method of accounting to secure financing.



At Ask Me Help Desk you can ask questions in any topic and have them answered for free by our experts. To ask questions or participate in answering them you must register for a free account. By registering you will be able to: Get free answers from experts in any of our 300+ topics. Accept money for answers that you provide. Communicate privately with other members (PM). See fewer ads. Sign Up!