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13cash and Accrual

The document compares and contrasts the cash basis and accrual basis of accounting. Under the cash basis, income is recognized when received and expenses when paid, regardless of when earned or incurred. The accrual basis recognizes income when earned and expenses when incurred, regardless of when payment is received or made, and takes into account accruals and deferrals. Tables show how specific items like sales, purchases, and depreciation are treated under each method. Formulas are provided for converting from cash basis to accrual basis.

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Lily Dania
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21 views6 pages

13cash and Accrual

The document compares and contrasts the cash basis and accrual basis of accounting. Under the cash basis, income is recognized when received and expenses when paid, regardless of when earned or incurred. The accrual basis recognizes income when earned and expenses when incurred, regardless of when payment is received or made, and takes into account accruals and deferrals. Tables show how specific items like sales, purchases, and depreciation are treated under each method. Formulas are provided for converting from cash basis to accrual basis.

Uploaded by

Lily Dania
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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CASH AND ACCRUAL

BASIS
COMPARISON
 Income recognized  Income recognized
when received when earned
regardless when regardless when
earned received
 Expense recognized  Expense recognized
when paid regardless when incurred
when incurred regardless when paid

 does not recognize  recognizes


accruals and deferrals accruals and deferrals

CASH BASIS ACCRUAL BASIS


CASH BASIS vs. ACCRUAL BASIS
ITEMS CASH ACCRUAL
Sales Cash Sales + Cash Sales +
AR collections Sales on account

Purchases Cash Purchases + Cash Purchases +


Purchase payments Purchases on account

Other Income Items received Items earned


regardless when regardless when
earned received

Expenses Items paid regardless Items incurred


when incurred regardless when paid

Depreciation Normal recognition Normal recognition


Cash to Accrual
 Income received (cash) xxx

 Add: D B xx
 A E xx xxx

 Less: D E xx
 A B xx (xxx)

 Income earned (accrual) XXX


Cash to Accrual
 Expense paid (cash) xxx

 Add: P B xx
 A E xx xxx

 Less: P E xx
 A B xx (xxx)

 Expense incurred (accrual) XXX


D B

A E
Deferrals:(+) Beginning Accruals: (+) Ending
GUIDE

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