Two business cards
Do you have a small grocery store in the neighborhood? Customers pay cash because the store has "no lending policy". Well, except perhaps the casual loan for the unemployed guy at the end of the block. Instant noodles and other products are sold in cash. The seller must pay for bottled drinks within 15 days.
The owner of the store keeps track of all transactions in your business. Cash receipts are recognized as income and cash payments when they are recognized as an expense in the month paid or paid. The cash surplus of cash payments related to cash payments is the net income of the store. This Accounting Cash Base
Now, less than a mile from this small grocery store, a large chain of stores. Customers pay cash or credit card. Distributors may grant lending terms for up to 90 days. The business employs more staff, such as merchandisers and cashiers.
Obviously, the deal in this supermarket is not as easy as the neighboring convenience store. The basis for accounting cash is insufficient and is not permitted under International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS).
Financial Statements and Accounting Technique or Fund
for large or small, profitable or non-profit purposes, identifying, recording and communicating economic transactions and events among interested users and decision-makers. This information is provided in the form of financial statements. One of the basic financial statements is the profit and loss account, which summarizes the income and expense for that period, as well as the resulting net income or surplus over the income.
Measurement of income to the accounting method or basis adopted by the reporting entity. This indicates that the transactions are recorded and how they are included in the financial statements.
As we have seen in the small grocery store and in the supermarket, there are two main methods or accounting bases. These are:
- Cash Accounting Basis and
- Earnings Accounting
Cash Basis, Simple Accounting Method
The basis for accounting cash is simple, simple and easy to use. It only records transactions and events if they include the receipt or payment of cash. In essence, according to the accounting procedure:
- Revenue should be recognized in the period when the cash is received or collected, rather than when it is acquired, but
However, this accounting method often results in misleading information in the financial statements since not all revenue and expenses are recorded and transactions can be manipulated to achieve a favorable result of the operations.
Accounting is only permitted for the following entities:
- Non-governmental enterprises
- Revenue shall be recognized in the period when the sale or provision of services is made, irrespective of whether the cash has been received; in other words, when it is probable that future economic benefits will flow to the entity and reliable measurement is possible.
- Expenditures arise when they arise, no matter when they pay cash.
- Revenue and expenditure are entered in the accounting records and in the financial statements of the periods to which they relate.
In the literature to accumulate (19459010) (verb) means that natural growth, growth, or benefit (eg wisdom) or occasionally accumulate or add (for example, interest). Accrual (the noun), on the other hand, refers to the process of accumulation.
However, in accounting, accrual accounting specifically refers to the accumulation of revenue and expense when they receive or pay cash. When the goods were delivered or the services were performed, the seller fulfilled his obligations under the contract. Thus it is legitimate to recognize the sale or revenue, regardless of whether the vendee is paid or not paid, in which case the seller is liable for receipts from receivables and receivables
Accounting is based on accounting: the Ideal and Final Purpose
In fact, the basis of accounting is the ideal and ultimate goal in financial reporting. Presentation of Financial Statements in particular paragraph 27 states that:  An entity's financial statements, with the exception of cash flow information,
Using the Accounting Approach Approach. "
Based on the underlying principles of accounting:
The financial statements prepared using the Accrual Basis system not only inform previous transactions related to the payment and cash withdrawal, but also the cash payment obligations to be paid in the future and the funds to be paid in the future. This provides a better basis for assessing the past and future performance of an enterprise than information based exclusively on cash receipts and payments.
What is your business, then – cash or an active account?
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