Difference between Accrual and Cash Accounting
What is the Difference between Accrual and Cash Accounting Method
The difference between accrual and cash accounting method used for recording revenues and expenses results from when the business transaction is recorded in the “books” (timing).
One business uses the accrual method means it record its revenues and expenses at the time of current business transaction, in the “books” before a business. Unlike cash method, it do not wait if they do not get paid by the customers or in case of supplier do not paid to record a transaction.
Another business which uses cash method, it does record their revenues and expenses. If they are paid, but in case the customer do not paid, the will not record their expense or revenue in the books in current business transaction.
Relationship between Bookkeeping System used and the Accounting Method used
The bookkeeping system of Single-Entry is used with the Cash Method. In this, debits and credits are not used to record financial events.
The Double-Entry bookkeeping system can be used with both the Cash and Accrual method of accounting.
Debits and Credits are used to record financial events.
So you know that,
For your each business you build, you may use different methods such as the cash method and the accrual method.
Similarly, you can also keep two groups of books, one book for the cash method and the other book for the accrual method for the same business. However, you have to select one of the methods for tax purpose and continue to use it in the future. This is perfectly legal. It’s done because when business men wants to hide their real earning during the trouble.
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