ACCT 212 Week 3 Course Project Milestone Financial Accounting latest 2024

ACCT 212 Week 3 Course Project Milestone Financial Accounting latest 2024Let's start the week by exploring accrual-basis accounting. Why do accountants use the accrual-basis method instead of the cash basis method of accounting? What are some of the benefits of using accrual accounting? While reading the text these questions were reviewed in detail. The Accrual Accounting method due to the following reason 1. Delivers a more accurate representation actual profit compared to cash. 2. Follows matching principle. Revenue + Expenses should be recognized in the same period. 3. Accounts payable and receivable allows for a more accurate picture of the long-term profitability of the company. 4. Future expenses and Revenue are considered with accruals gives the company, makes for simple business planning. 5. Expenses are accounted once they are realized accruals give the computer, the ability to deduct some expenses on tax returns, prior to actually paying them. Examples of the proper usage of the accrual principle are: ... Record revenue when you invoice the customer, rather than when the customer pays you. Record an expense when you incur it, rather than when you pay for it. 1. Delivers an accurate picture of overall cash flow for the business. Many business transactions occur over a period of several months and therefore several accounting periods. Accrual accounting reflects that income and expenses generated in one month can carry over into the next month or even longer. 2. Investors favor accrual accounting. A business that uses accrual accounting is often looked at as more permanent and established than businesses that use cash-basis accounting methods. 3. It's the preferred method for GAAP. The Generally Accepted Accounting Principles set forth by the Financial Accounting Standards Board prefers accrual accounting over cash-basis accounting. Because the financial statements for a business that uses accrual accounting are deemed more accurate since the transactions reflect when they actually took place instead of when money is exchanged. Disadvantages of Accrual Accounting There are some disadvantages to using the accrual accounting method, most of which revolve around the staff needed to maintain the system: