Accounting: Generally Accepted Accounting Principles and Cash Accounting Essay

Submitted By cricket1981
Words: 373
Pages: 2
Open Document
Accounting
Rusty Stevenson
Acc. 290
Andy Knowlton
University of Phoenix
March 28, 2013

Accounting
Commercial accounting and generally accepted accounting principles, generally describe the accrual basis of accounting over the cash basis. The differences in accrual and cash accounting can become confusing. The ability to differentiate between the two is important in the accounting world.
Accrual accounting is defined as an accounting method which, measures the performance and position of a company. The accrual method recognizes economic events regardless of when cash transactions occur. The economic events are recognized by matching expenses to revenues. Matching revenues and expenses is known as the matching principle. Recording of transactions occurs at the time in which, the transaction occurs rather than when payment is received or made. The accrual method allows the current cash flows to be combined with future expected cash flows to give a more accurate picture of a company's current financial condition. Accrual accounting is in accordance with the GAAP principles. This accounting method is harder to understand and learn but is a better picture of the organizations worth at any certain point and time.
Cash basis accounting is defined as a method of accounting where transactions are recorded when cash payments are made or received. Cash basis accounting is not in accordance with GAAP principles and is not a good management tool because cash accounting leaves gaps in the purchasing of products or sales of product, and when the cash transfers hand. Cash accounting is easier than accrual accounting and is suitable for small
Show More

Related Documents: Accounting: Generally Accepted Accounting Principles and Cash Accounting Essay

Essay on Generally Accepted Accounting Principles and Cash

AC221 – Financial Accounting Session 3: Income Statement Review: Typical Accounting Titles • The balance sheet Assets Cash Short-Term Investment Accounts Receivable Notes Receivable Inventory (to be sold) Supplies Prepaid Expenses Long-Term Investments Equipment Buildings Land Intangibles Liabilities Accounts Payable Interest Payable Taxes Payable Unearned Revenue Notes Payable Bonds Payable Stockholders’ Equity Contributed Capital Retained Earnings Quiz Time……

Words 1857 - Pages 8

Essay about Generally Accepted Accounting Principles and Cash

Provide financial information, statements, and reports to various users (Who are users?) Seasonality of Business Short distribution chain and time span Labor intensive Major investment in fixed assets What accounting does in our industry? Generally Accepted Accounting Principles (GAAP)------------------------------------------------------------ (1)Cost 말고 (2) Business entity - a restaurant owner, decided to take some sushi home for her dinner. He had to record the cost of the sushi as…

Words 1916 - Pages 8

Generally Accepted Accounting Principles and Cash Flows- Cash Essay

products and services provided to costumers, such as kayaking, mountain biking, rock climbing, etc. Other operating activities would be costs of running the business. Some these costs include utilities, taxes, advertising, rent, etc. Assets- Cash, Accounts Receivable, Supplies, Equipment, Buildings, etc. Liabilities- Accounts Payable, Salaries Payable, Interest Payable, Utilities Payable, Notes Payable. Stockholder's Equity- Common Stock, Retained Earnings. Revenues- Service Revenue…

Words 515 - Pages 3

School: Generally Accepted Accounting Principles and Cash Flows Essay

INVESTING, AND FINANCING ACTIVITIES Operating Cash inflows From customers paying on account for the sale of goods or services. From customers for cash sales. From returns on loans (interest) and on equity securities (dividends). Cash outflows To suppliers on account for purchases of inventory and other goods and services. To or on behalf of employees for services and benefits. To government for taxes. To creditors for interest. Investing Cash inflows Proceeds on the sale of property,…

Words 1065 - Pages 5

Finance: Generally Accepted Accounting Principles and Debits Credits Cash Essay

Accounting 301 Intermediate Accounting I Adjusting Entries Review Handout Professor Mitschow The trial balance of Garcia’s Irish Pub (formerly a real place) at the end of the year on 12/31/02 is provided below. Debits Credits Cash $127,760 Accounts Receivable 11,120 Supplies 24,000 Equipment 63,600 Accounts Payable 26,480 Note Payable 20,000 Unearned Rent 7,200 Common Stock 80,000 Retained Earnings 100,800 Dividends 56,000 Commission Revenue 252,400 Rent Revenue…

Words 321 - Pages 2

Essay on Basic Accounting Concepts and Business Structures

Basic Accounting Concepts and Business Structures Pamela Inkelaar University of Phoenix Hung Tran ACC 537 February 2, 2015 Basic Accounting Concepts and Business Structures Topic 1: Identify and describe the sources of generally accepted accounting principles. Identify source hierarchy and explain why the hierarchy is important. Accounting has multiple forms and concepts depending on the type of business. This paper is going to identify the sources of generally accepted accounting principles;…

Words 732 - Pages 3

Discussion Financial Reporting Environment And GAAP

Environment and GAAP Generally Accepted Accounting Principles (GAAP) The role of generally accepted accounting principles (GAAP) in the preparation of financial statements is a set of guidelines that inform businesses how to properly record accounting information in a fair and consistent manner. “Is a rule” to meet that requirement, statements are prepared in accordance with GAAP, which encompasses the conventions, standards and procedures, necessary to define accepted accounting practice at a particular…

Words 440 - Pages 2

Essay on Explaining Basic Accounting Concepts Revised 2

Explaining Basic Accounting Concepts and Business Structures Tiffany Jacobs ACC/537 Financial Accounting Word Count: 752 Generally Accepted Accounting Principles & Sources General Accepted Accounting Principles (GAAP) are standards and procedures used by companies to assemble their financial statements. A company’s financial are regulated by these standards in order to provide sound support documentation to end- users. These reports have internal end-users such as management…

Words 744 - Pages 3

Financial Accounting Textbook Solution Essay

CHAPTER 1 Financial Accounting and Accounting Standards ASSIGNMENT CLASSIFICATION TABLE | | | | |Topics |Questions |Cases | |1. |Subject matter of accounting. |1 |1…

Words 11169 - Pages 45

Individual summar Week 3 Essay

Accrual-basis accounting is recording transactions as the service occurs, even if cash is not received yet (Kimmel, 2009). It makes sense that most companies would choose this way to me as I feel this is the best way to keep track of money that you are going to receive and keep things more up to date. The cash basis accounting is not recorded until the transaction until the cash is received (Kimmel, 2009). This to me would get really confusing if you are awaiting payment for a job already done…

Words 398 - Pages 2