ACC 113 Lecture Notes - Lecture 25: Accrual, Internal Control, Cash Flow

• School: Tunxis Community College
• Department: Accounting
• Course: ACC 113
• Professor: Muccino

Document Summary

Accrual accounting"s purpose is to move beyond cash flows towards a broader economic concept of profit and financial position. Limitation accrual accounting, basing on history reflects on the past rather than looking into the future, as managers are inclined to do. Only look at the resulted actions, not the reason why mangers initiated action. Evidenced based accounting procedures for recognition of profit and expenses may not relate very well to economic concepts of earnings, or manager"s struggles to increase the value of their companies. To managers seeking even handed evaluation of their performance, accounting may seem downwardly biased in its measures. Criteria for revenue and expenses recognition is subjective some managers manipulate, some managers find it too loose and flexible. The shorter the time period, the more mismatch the figures are between cash flow and accrual profit. Accrual accounting has many advantages and is very widely used, but managers should not accept it uncritically.