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What are the differences between accrual basis and cash basis accounting?

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Answer:

Accrual Basis:

A process of accounting that recognizes the impact of transactions on the financial statements in the time periods when revenues & expenses occur instead of when cash is received or disbursed is called accrual basis.

For example, credit sales for the year 2008 we re Rs. 2,00,000. Cash collected from the customer during 2008 was Rs. 1,50,000. In this case credit sales for 2008 should be considered as Rs. 2,00,000 & not Rs. 1,50,000.

Cash Basis:

A process of accounting where revenue & expense recognition would occur when cash is received & disbursed is called cash basis. For instance, a piece of land may have been purchased at Rs. 1,50,000, whereas the company considers it to be worth Rs. 3,00,000. The land is recorded in the books of accounts at Rs. 1,50,000 only.

First answer by ID0996013567. Last edit by ID0996013567. Question popularity: 1 [recommend question].

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