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are:
• Principles underlying the cash basis are easy to understand and easy to
explain.
shortcomings:
known.
• Cash accounting focuses solely on the cash flows of the current period.
under:
manifold.
standards.
• Accountability is ensured.
Decision-Making.
.
Cash Basis of Accounting is a simple method which can be learnt quickly and
performed with confidence. It does not require training as a book keeper or an accountant
to understand the method, so it can be performed almost by all with basic education. In
GAAP unlike the Accrual Basis. It presents and unrealistic view of financial transaction.
etc, are completely ignored. It does not follow the matching concept.
One of the benefits of Accrual Basis is that in addition to the cash flow information, users
will also have additional information about assets and liabilities. Accrual-based
accounting keeps better track of assets and liabilities than cash basis accounting, making
it easier to see where a business really stands. Financial reports prepared under this
method also allow users to assess accountability for all resources the entity controls and
how those resources are used. This facilitates better asset management, including better
surplus assets, and better management of risks such as loss due to theft or damage.
But despite of these advantages, there are still drawbacks to accrual-based accounting.
One of those is that it is relatively more complex than the Cash Basis. Some aspects are
more difficult than cash implementations. For example; it is difficult for a government
organization to know the full amount of tax revenue that it is likely to receive at a given
time. It can also provide information overload, particularly for small entities. In addition,
setting up an accrual basis business also involves burdensome task of identifying and
does not equal the period's change in cash. Accrual-based accounting also doesn't track
cash flow very well unlike the Cash Basis of accounting. It is entirely possible, for
example, for an accrual-based income statement to show an impressive profit while cash
flow is very poor. Despite this drawback, most large businesses rely on accrual basis
Each of these methods has its own advantages and drawbacks. While some
organizations have the choice of either working with Accrual basis or the Cash basis,
but for others, it is required by regulation to use the Accrual basis. Whichever
method is chosen, the important thing is to properly satisfy the reasons for its
adoption
eHow.com http://www.ehow.com/about_5437604_accrual-accounting-pros-
cons.html#ixzz127D7Qbwy
Adams, R. A. (2006) Public Sector Accounting and Finance. Revised ed. Lagos,
Nigeria: Corporate Publishers Ventures.
http://www.helium.com/items/1506318-differences-between-accrual-basis-accounting-
and-cash-basis-accounting?page=3