Book Yoda. Business & Investing.

Cash basis accounting is a very simple form of accounting. When a payment is received for the sale of goods or services, a deposit is made, and the revenue is recorded as of the date of the receipt of funds – no matter when the sale was made. Checks are written when funds are available to pay bills, and the expense is recorded as of the check date – regardless of when the expense was incurred.

The primary focus is on the amount of cash in the bank, and the secondary focus is on making sure all bills are paid. Little effort is made to match revenues to the time period in which are earned, or to match expenses to the time period in which they are incurred.

The primary advantage of the cash basis is that it is quick and easy. For a business that does not sell on credit, and pays bills as they are incurred, it may be all that is necessary. The cash basis records only cash transactions, making the cash account a crude measure of how well the business is performing.

The 2 links give a pretty good summary of cash vs accruals accounting.

2007-06-19 05:06:56 by jwarner04011

Financial Accounting ACG2021 SFCC Spring 2008 Chapter 1 Crosson

comment:
“ The information perspective, the notion that accounting is designed to provide information, views accounting as using the language and algebra of valuation but for the purpose of conveying information. The distinction between the two views is subtle but profound. The ‘measure view’ approach stresses the importance of a formal measurement system that well measures value. The ‘information content’ approach stresses the importance of a formal measurement system that well conveys information.

The "measure view" has done the job of simply making the calculations, but having done that, the data just sits there waiting for the user to look it and obtain some purpose/meaning from it. Whereas, the "information content" takes the same data but arranges, manages, and presents it in a more usable way to provide purpose and meaning to the user. The latter would be preferable.

2008-09-05 22:13:28 by li l

I was able to figure out the other answers but I got stuck on these three. Here is the question.

Indicate whether the transcation would be classified as Operating, Investing, or Financing. Then indicate whether the transaction would be classified as a source or use.

a)Short-term investment securities were purchased
b)Interest was paid to long-term creditors
c)A long-term mortgage was entirely paid off.

a) Cash Out Flow of operating activities because trading securities purchases are normal business expense.
b) Cash payment for the interest of Loan (not repayment of the loan) is operating activities. Repayment of the loan is Financing activities.
c) This is COF of financing activities.

Cheers...

2009-01-31 12:31:23 by kwhy96

Does accounting Flux analysis mean an accounting method? Is it complicated? How to do it

It means the change in income and expenses from month-to-month and year-to-year. Flux means change.

2007-08-24 09:59:09 by Yue R

Why do things like accounts payable and change in prepaid rent, inventory, and receivables show up in the statement of cash flows under the indirect method? Aren't only quantities involving a direct transfer of cash supposed to be listed? Aren't cash flow statements only supposed to list cold, hard, cash transactions, or can they include accrued items as well?

That's the direct method and it looks much different. The indirect method is used most often because it's easier to prepare.

2008-11-06 16:04:48 by Yes