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Differentiate cash accounting and accrual accounting.
The major differences between cash accounting and accrual accounting are as follows −
Revenue and expenses are recognized when it’s made through cash only.
Simple and intuitive.
Not recognized by GAAP.
No holistic approach.
Tax are not paid for money yet to receive.
Mostly used by small business or sole proprietors.
Focus on liquidity.
Not more accurate.
Helps to estimate how much cash is generated.
All expenses and revenue are recognized.
It is complex and difficult to understand.
Recognised by GAAP and companies act.
Tax paid on paid for money yet to receive.
Mostly used by business having high revenues.
Focus on revenue/expenses/profit/loss.
Helps to estimate how much loss or profit occurred in a period.
- Explain the difference between accrual base accounting vs cash based accounting.
- Differentiate between cost accounting and financial accounting.
- Differentiate between accounting standards and accounting concepts.
- What is Accrual Principle in Accounting?
- Differentiate between finance and accounting.
- Explain cash based accounting.
- Differentiate between accounting profit and taxable profit
- What are Operating cash flow in accounting?
- Explain accounting period in finance and accounting.
- What is accounting and derive accounting equation?
- Compare between accounting concepts and accounting convections.
- Differentiate between accounting breakeven point and financial breakeven point.
- Write the accounting entries for cash flow hedge
- What is payroll accounting in finance and accounting?
- Write the differences between financial accounting and management accounting.