Accrual vs. Cash Basis Accounting
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ACC290
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Introduction
In business, there are many different forms and standards to accounting. These standards are governed by rules, laws, regulations and accurate accountability of a particular business account. There are some general differences between general and commercial basis accounting principles, also differences between accrual and cash basis accounting. Those differences will be looked at here.
General and Commercial Basis Accounting Principles
According to Wikipedia.com, generally accepted accounting principles (GAAP) refer to the standard framework of guidelines for financial accounting used in any given jurisdiction; generally known as accounting standards or standard accounting practice. These include the standards, conventions, and rules that accountants follow in recording and summarizing and in the preparation of financial statements. Hubpages.com discusses commercial accounting, also known as profit accounting, defining that it performs primarily by profit and loss. The reporting for a profit organization is directed to the investors. ("The Principles Of Commercial Accounting And Fund Accounting", 2011).
Accrual vs. Cash Basis Accounting
According to the readings, accrual basis accounting is defined as in which companies record, in the periods in which the events occur, transactions that change a company's financial statements, even if cash was not exchanged. In other words, it means that recorded or un-recorded, all transactions are taken and projected into the overall balance. Cash Basis Accounting basis in which a company records revenue only when it receives cash, and an expense only when it pays out cash. This means that this means of accounting, only takes accountability of the physical cash that is at a physical location. The differences, accrual is