Tag Archives: Assess accounting Flexibility

Running a Company from the Financial Perspective | Accounting Analysis

Accrual Accounting versus Cash Accounting

Accrual basis = immediate recognition.

Cash basis = when the case is received.

Before we dive into earnings management as a subtopic within business analysis and valuation, it is helpful to understand the difference between Accrual and Cash Accounting. The cash basis is only available for use for companies has no more than $5 million sales per year.

The accrual basis is used by larger companies because matching revenue and expenses in the same reporting period so that the true profitability of an organization can be discerned.

Cashflows are harder to manipulate. The big difference between the two is when the transactions are recorded.

Continue reading Running a Company from the Financial Perspective | Accounting Analysis