Other
Financial Accounting
- Course
- Institution
- Book
It is an assignment for week 2 in the university of the people
[Show more]
Connected book
Book Title:
Author(s):
- Edition:
- ISBN:
- Edition:
More summaries for
-
Chapter 1: Partnership Formation
-
Class notes Introduction To Business Principles of Accounting Volume 1 - Financial Accounting
-
Class notes Introduction To Business Principles of Accounting Volume 1 - Financial Accounting
Seller
Follow
abdurrahman2
Content preview
Written Assignment Unit 2Cash basis accounting: This accounting method is mostly used for small business-like farmers,
doctors, personal finance etc. This is an appropriate accounting method for those businesses
where there are not many pre-and post-payments. In cash basis accounting you record
transactions only when you receive the cash or when the expense occurs but in this accounting
method it is easy to track the cash flow.
Accrual accounting method: This accounting method is used for large businesses where there
is a lot of pre-and post-payments. In the Accrual method, you record the transaction but you
didn’t receive the money. It records transactions as Account receivables or Account payables or
sometimes the cash is received and also the transaction is recorded simultaneously. The accrual
accounting method gives an accurate picture of the profitability of the company.
It is a good idea to switch to accrual accounting method for the Salon owner;
The positive impact in business:
It will give more accurate information about the revenue of the business as it records the
transaction but the payment is pending and also sometimes the payment is paid and the
transaction is recorded all together at the same time.
In-salon business, have products like hair care, skincare, face masks, etc. when buying
these products, the owner receives the product but pays later or sometimes pays advance
and receives later. Such can be recorded more efficiently and easily without misleading
the revenue of the business.
It is easy to forecast in the accrual accounting method. Since the future expenses and
revenues are recorded it will help the business owner to create a future budget and can
operate more efficiently.
As the future expenses are recorded it will give the chance to deduct future expenses on
tax returns before actually paying them.
The negative impact in business:
It is hard to track cash flow in the accrual accounting method because there are account
payables and account receivables. This needs a lot of hard work and there can be a
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller abdurrahman2. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $5.49. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
50064 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now