I get the main idea between cash and accrual basis of accounting, however, which one requires goods to be delivered?

For example, if I am a service contractor and I order computers on 6/30, which is also my year end date. I then bill my funding agency for the computers with my June invoice. My funding agency operates on cash basis of accounting. If I haven't received the computers yet, but I paid for them (incurred the expense), I can include it in my June invoice correct?


Now lets say my funding agency operated on accrual basis with the same scenario as above, I would not be able to bill for the computers until I received it even though I've incurred the cost already, correct?

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Originally Posted by stanhsa

I get the main idea between cash and accrual basis of accounting, however, which one requires goods to be delivered?

For example, if I am a service contractor and I order computers on 6/30, which is also my year end date. I then bill my funding agency for the computers with my June invoice. My funding agency operates on cash basis of accounting. If I haven't received the computers yet, but I paid for them (incurred the expense), I can include it in my June invoice correct?


Now lets say my funding agency operated on accrual basis with the same scenario as above, I would not be able to bill for the computers until I received it even though I've incurred the cost already, correct?

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I think you fail to understand accrual accounting. In accrual accounting when you incur the liability you bring it to account. So if you paid for goods not yet received you bring them to account as a prepayment. The funding of the transaction is another matter. The funding company has not yet incurred the liability according to the contractural relationship with you. You can bill them but they don't have to bring the transaction to account. If the goods are undelivered you will have to make a balance day adjustment either way to account for the fact you have invoiced goods that are undelivered.

What you have to consider here is when did you acquire title for the goods, when you paid for them or when they are delivered or when they were invoiced, the funding company has to make the same judgement

Umm... all I want to know is if and when the delivery of goods matter. Under cash basis or accrual basis? Lets say I order an item online on 6/29 and my year end is 6/30. Under cash basis, I can record the expense even though I HAVE NOT RECEIVED THE ITEM, correct? There is no invoicing or title involved since I'm ordering an item online lets assume.

To answer your question a balance date is the point where the books are finalised as in, say, the end of the financial year, and reports are drawn up. So questions of delivery and payment don't have an immediate consequence until that time. In cash accounting you bring the transaction to account when you pay, that is; when the money flows out of your bank account. In accrual accounting you bring the transaction to account when you take possession or incur the liability. Accrual accounting is designed to give a clear picture of the financial position whereas cash accounting is only concerned with transactions in a cash flow