The financial statements prepared on the basis of accrual-based accounting states the real time results. Unlike cash accounting, no waiting period is involved to get the figure of profits. Thus, the management can immediately design strategies to improve sales and generate more revenues as soon as they get results. This keeps the company in a progressive mode and it is very important for viability. The financial management and activities related to monitoring become effective as this method presents the cash received or expensed and the amount to be received or paid in the future. Business analysts use it to interpret the business trends and prepare a statement of cash flows at the regular interval. Moreover, the records of income and debts can be maintained more accurately on the basis of accrual accounting. It gives the fair view of resources and financial responsibilities to the stakeholders of the company.
Discuss why accrual based accounting is used by companies throughout the world. What are some of...
What are some of the consequences for companies in their use of estimates rather than actual amounts for some financial statement items?
Since most companies use accrual based accounting, what is the purpose of the cash flow statement to a company's decision makers? Give a real life example.
What are the differences between the financial and managerial accounting? Discuss. Financial accounting is a language used for communicating financial information that helps users make better economic decision. Discuss. What is meant by the accrual basis of accounting? Discuss. What are the differences between sole proprietorship, partnership, and corporations? Financial accounting information should have some characteristics in order to enhance the decision making. Discuss. Discuss how the choice of depreciation method can be used as a tool to increase reported...
Professor’s Question: "Most companies will use accrual accounting. Why? It is easier to compare amounts from one period to another. The cash basis makes it more difficult to compare numbers. Why do we compare numbers in a manufacturing company? Why do we compare numbers by products? Why do we compare numbers by similar companies? Do you think Apple and Samsung keep up with numbers from each other and their other competitors? In business, one of the most important things is...
What is the main difference between cash and accrual accounting? Why is accrual accounting adopted more widely than cash accounting? (160 words maximum) Explain the concept “depreciation” in your own words. Suppose two companies acquired a same fixed asset at the same time, both of them believe that the useful life of the assets is five years with no residual value. Company A adopts straight-line depreciation method while Company B uses diminishing balance depreciation method at a depreciation rate of...
Explain the difference between accrual based accounting and cash basis accounting. -What is the revenue recognition principle? -What is an accrual? -What is an unearned revenue? -What is the trial balance used for?
a) Why is the accrual basis of accounting generally preferred over the cash basis? b) What is a prepaid expense and where is it reported in the financial statements? c) What type of assets requires adjusting entries to record depreciation? d) What contra account is used when recording and reporting the effects of depreciation? Why is it used?
U.S. GAAP mandates accrual basis accounting for income recognition. However, the statement of cash flows is a mandatory financial statement as a part of a full set of financial statements. Why, if so much emphasis is placed on accrual basis accounting, must a statement of cash flows be presented? What is its purpose and how is it useful to stakeholders? Presenters of such statement may choose to present using the direct or indirect method. Discuss the similarities and differences between...
List the 3 financial statements used in financial accounting. Discuss the importance of these financial statements. Why do we use these? Who are the users of this information? Discuss how a healthcare manager might use each one. In your opinion, do you feel that one is more important than another? Why or why not? What would happen if we didn't have these types of tools?
Describe why you think accrual accounting helps the reader of financial statements better understand a company’s financial position, compared to cash basis accounting. Include in your answer a description of the matching concept and provide an example, taken from class lecture or assigned problems, of a transaction that honors the matching concept. It may help you to consider how net income is impacted by recorded revenue when it is earned rather than when cash is collected. Content, concept application, and...