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Difference between Accrual & Cash?


#1

I would like to know more on what is the difference between Accrual & Cash basis as I am new in Accounting. As I got 2 different figures when I generate the tax reports for accrual and cash. I need more clarification on this matter. Appreciate if anyone out there could assist me.


#2

You can learn everything you need to know at http://www.accountingcoach.com. In implementation, the differences are significant, and the timing of taxes can be affected. But the fundamental difference is simple. In cash accounting, income and expenses are reported when money is spent or received. In accrual accounting, they are reported when earned or owed, regardless of whether the money has been paid.

Accrual accounting more accurately reflects the true position and performance of the business, because it acknowledges obligations in both directions, not just cash flow. That is why larger businesses are virtually always required to use it.