ARE 2210 Lecture Notes - Lecture 1: Accrual
29 Jan 2020
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Document Summary
This issue addresses the timing of recording and reporting of the income and expenses. Cash- report at time $ actually received or paid-most popular method-easiest and most direct. Actually received cash or paid (can be check) Accrual- report $ at time earned or incurred regardless of when cash changes hands. Reporting transactions such as to sell something to someone and didn"t receive the cash yet but it is still reported as income even though you didn"t receive the cash yet. Cash allows for use of single entry accounting. Difference between cash and accrual is timing. Many small ag businesses are cash basis. Special rules apply to certain entities that must use accrual accounting. Example 1: on 1/16/18, abc billed xyz for consulting services. Cash basis: on 1/16/18 no entry is made because no money has been exchanged. Abc will not record the sale until it receives payment in february.
