Cash Acrual: Accrual Vs Cash Accounting Technique (Essay Sample)

Accrual Vs Cash Accounting Technique
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Accrual Vs Cash Accounting Methods
Cash and the accrual accounting basis are the basic guidelines and rules that companies follow while keeping and preparing their financial records and reports. The major difference between the two techniques is based on how each method records cash payments and receipts CITATION Jer10 \l 1033 (Weygandt, Kieso, & Kimmel, 2010). Cash accounting basis is a method that recognizes incomes at the period when physical cash-inflow occurs. Similarly, expenses are recorded when cash is given out. CITATION Jam12 \l 1033 (Heintz & Parry, 2012). On the contrary, the accrual accounting technique recognizes expenses and incomes at the period when they are incurred or earned, irrespective of when the money related to those transactions will be received or paid.
If the grocery store owner makes sales in April to a hotel to be paid in June, the accrual method will record the transaction under the month of April despite the fact that cash will be received in June. However, the cash accounting basis will recognize the revenue as relating to the month of June since cash was received in that month. For the grocery store the accounts will be different since if the accrual basis is used the revenue and expenses will be matched CITATION Jam10 \l 1033 (Pratt, 2010). However, if the cash basis is adopted the expenses will not match the revenue. This is because the expense incurred by the store in April will not match the revenue collected in June, as the two will be recognized under two different periods.
In conclusion, the acc...