I am having trouble comparing cash and accrual basis accounting and applying the revenue recognition principle and the matching principle. How will I show whether each transaction would be handled as a revenue or and expense using both the cash basis and accrual basis accounting systems.
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Its important to realize the difference between thew two systems , its the timing of recognizing expenses and revenues.
It treats for in the income statement f when the money is received and accounts for expenses when paid only.
Expenses are reported on the income statement when the cash is paid out. ses when paid
Accrual basis reports all of the revenues actuallyearnedduring the period and all of the expenses incurred in order to earn the revenues and expenses reported on the income statement in the period when they are incurred, meaning the revenues are recorded even if cash has not been received.
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Sep 7th, 2015
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