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Cash Vs Accrual Accounting - Coggle Diagram
Cash Vs Accrual Accounting
Differences
Timing of recognition of Revenue/Expenditure
Features of Cash Based Accounting
recognizes transactions when cash is received or payment is made
used widely for small businesses
Advantages - Cash Accounting
Easier to understand
helpful for cash flow
Disadvantages- Cash Accounting
Is not representative of the creditors/payables nor debtors
Cash Accounting does not provide a full representation of the business
Features of Accrual Based Accounting
recognizes expense when it is incurred, revenue when it is earned
recognized worldwide as an acceptable accounting method
Aligns with other accounting concepts and conventions e.g. matching, consistency
Disadvantages - Accrual Accounting
more complex accounting system
if standards not completely understood, figures will be presented incorrectly
requires professionals to provide accrual accounting
Advantages - Accrual Accounting
requires professionals to provide accrual accounting