Differences between accrual-basis financial statements and cash-basis financial statements Discuss the differences between accrual-basis financial statements and cash-basis financial statements....

Differences between accrual-basis financial statements and cash-basis financial statements

Discuss the differences between accrual-basis financial statements and cash-basis financial statements. Determine which provides more useful information and the reasons it is more useful.

 

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In accounting, there are two methods of recording the revenue and expenses of a business entity.  The "cash basis method" is a method that records revenue when cash is received and records expenses when cash is spent. The "accrual basis method" is a method that records revenue when it's earned (whether or not it's been received) and expenses when they are incurred (whether or not they've been paid). 

For accounting and tax purposes, the accrual basis method is generally considered to be the most accurate and give the most useful information. Therefore, accrual basis financial...

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