ACCT-212 Week 3 Discussion: Reasons Why Accountants Use The Accrual Method

ACCT-212 Week 3 Discussion: Reasons Why Accountants Use The Accrual Method Why do accountants use accrual accounting instead of the cash basis of accounting? The accrual basis of accounting furn ishes an enhanced representation of a company's profits during an accounting period. This is because revenues are reported on the income statement when they are earned, which frequently occurs before the cash is received from the customers. Also, expenses are reported on the income statement when they match up with the related revenues, occur, or expire, often taking place in a period different from when payment is made. (Thomas, Tietz & Jr, 2018, p. 121). What are some of the benefits of using accrual accounting? The accrual basis of accounting provides a better picture of a company's financial position at the end of the accounting year. The reason is that all assets that were earned are reported and all liabilities that were incurred will be reported on the balance sheet. The accrual basis of accounting is required because of the matching principle, which directs a company to report an expense on its income statement in the period in which the related revenues are earned. (Thomas, Tietz & Jr, 2018, p. 124). Reference Thomas, C. W., Tietz, W. M., Jr, W.T. H. (2018). Financial Accounting, (12th Edition). Retrieved from