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Disadvantages for cash basis accounting, business and finance homework help
Try to attempt to take the conversation further by examining their claims or arguments in more depth or responding to the posts that they make to you. Keep the discussion on target and try to analyze things in as much detail as you can.
6 sentences or more.
Two advantages of cash basis accounting are:
1. It gives you a clear picture of how much cash your business actually has.
2. It is a simple method that is easy to understand and does not require a bookkeeper.
Disadvantages for cash basis accounting are:
1. It can be misleading when trying to see the long term profits of a business.
2. It is easier to make errors in that the person could mistakenly enter the wrong amounts and not catch it until later.
Two advantages for Accrual basis accounting are:
1. It gives a better representation of the flow of the business for investors.
2. It shows income and debts of the business more accurately.
Disadvantages for Accrual basis accounting are:
1. It does not give a clear picture of how much cash the business actually has. (Sales could show high, but you may not have been paid yet)
2. It is not as simple as cash basis accounting and may require a bookkeeper.
I believe that accrual basis accounting provides the most useful financial information to users because it produces better financial statements.
Small companies are best suited for cash basis accounting like a lawn service, or a hair salon. Larger companies that sell over five million dollars a year are required to use accrual basis accounting.