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Acrual vs

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Submitted By spiderman2014
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Accrual vs. Cash
Thomas Warren Brow
2 October, 2014
HSM/260
Sara Stevens

In cash accounting you only show transactions that are cash in or cash out transactions, and for a non-profit agency that does not show enough. The accrual method shows all transactions whether they are cash, credit, insurance, or check. In this system it keeps all monies out in the open, and stops any hidden monies from appearing out of nowhere and shows all monies and what is being done with them and how they are generated. The accrual takes the steps necessary to ensure that the agency has a clear and accurate account of any spending the agency does.
In the accrual system you taken into account and record any revenue when the transaction occurs or a deal is made even in the event that there is no cash received, and more often than not the revenue and cash will not equal each other when this method is used. If the method of payment is cash when the service is rendered than it will be recorded the same, but if it is a credit payment that makes your revenue go up but your cash is the same then this is a case where the revenue and cash do not equal each other. ("Does Revenue Equal Cash In An Accrual System?", 2014)
It is vital because statement of cash flow is the last document that is done for the finances and gives a flow of information which adds validity and accountability to financial records of the company. All people who fund an agency use these records to see what they are funding and where the money is going. It ensures the credibility of the agencies financial records for any and all persons or agencies providing funds to the agency. (" Basic Accounting: The Importance Of The Cash Flow Statement", 2014)

References:
Basic Accounting: The Importance of the Cash Flow Statement. (2014). Retrieved from http://www.moneyinstructor.com/doc/importancecasflow.asp
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