What is Accrual Accounting? Cash vs Accrual Accounting Explained скачать в хорошем качестве

What is Accrual Accounting? Cash vs Accrual Accounting Explained

Get more in-depth lessons via Axel's Accofina books: (1) Financial Statement Basics https://www.amazon.com/Financial-Stat... (2) Ratio Analysis Fundamentals https://www.amazon.com/Ratio-Analysis... What is Accrual Accounting? Cash vs Accrual Accounting Explained Support the AccoFina Patreon if you're a fan, or believer, in my work:   / accofina   Time Markers: 1) Preamble 0:05 2) Introduction 1:01 3) Accrual Accounting Quick Outline 1:25 4) Accrual Accounting vs Cash Accounting 5:26 5) Bonus Fact 13:14 Please Help Out Translating the Captions, Titles or Description of this Video Tutorial: http://www.youtube.com/timedtext_vide... ACCOUNTING BASICS Accrual Accounting ‘Quick-guide’ INTRODUCTION What we’ll cover in this tutorial: 1. Quick outline of Accrual Accounting 2. Use Examples to Compare Cash vs Accrual Accounting ...and Why the Cash Basis is Often Weaker 3. Bonus Fact ACCRUAL ACCOUNTING QUICK OUTLINE Accrual Accounting is a basis, or method, of Accounting. In contrast to, for example, Cash Accounting It dictates how accountants record Revenue and Expenses Is considered a Generally Accepted Accounting Principle, and thus is the most widely used accounting basis (and often required) It better reflects the economic reality of business transactions, and allows better performance and position measurement from financial statements In Short: Revenue recorded when earned and Expenses recorded when incurred (and matched to Revenue) AND THESE EVENTS ARE NOT(!!!) tied to when cash changes hand Asset and Liability Accounts are used to account for the timing differences between Revenue/Expense recognition and when cash changes hand. E.g. Accounts Receivables and Payables Accounts ACCRUAL VS CASH ACCOUNTING Let’s Start with an Example... Barry’s Consulting Ltd wants to buy company cars for their senior executives from Michelle Motors Ltd. Barry’s Consulting place an order for 5x Cars on 15th April. The cars are delivered by Michelle Motor’s on 10th May. And Barry’s Consulting pays Michelle Motors on the 25th June. Let’s look at it from Michelle Motors’ point of view When does Michelle Motors record revenue? That is, when does Michelle Motors recognise the sale? According to Cash Accounting, it would be 25th June. According to Accrual Accounting, it would be 10th May. ACCRUAL VS CASH ACCOUNTING Why does this difference matter? Some of the problems of Cash Accounting... What if customers take different time periods to pay? E.g. one customer who never pays on time, or if all your customers pay round tax refund time How would you analyse sales, expenses and profit? ...Business ‘reality’ via the financial statements shouldn’t be dependent on a customer’s (or your own) payment frequency, or ability. Some of the problems of Cash Accounting... What if some transactions take a long-time to carry out and complete? E.g. building a Boeing Dreamliner or Airbus A380 Or if some transactions involve an upfront payment... E.g. a technology service contract? Again, how would you analyse sales, expenses and profit? ...Business ‘reality’ via the financial statements shouldn’t be missing information just because no cash has changed hands, nor include info just because cash has changed hands. Do you see why another method (or basis) of accounting would better reflect economic reality ...and allow better analysis and decision-making? Hence we have: Accrual Accounting BONUS FACT! Accounting in Ancient Mesopotamia Historians recognise the first Accounting Records were found in ancient Mesopotamia circa 4000 BC. They were one the first civilisations to record data for future use (accounting data storage), and not just to convey info, communicate or for ceremonial/religious reasons They used tablets that had a pictographic script on them (including for transaction data), and would organise and store these tablets based on what size and shape they were and their pictographic content (accounting record management). This video was brought to you by AccoFina... Subscribe to the Channel: https://goo.gl/84Sfeg Or just check out the Channel Page: https://goo.gl/yTj9Bs Most Popular YouTube Video: https://goo.gl/Jbv685 Latest YouTube Upload: https://goo.gl/wDM83Y http://www.accofina.com http://www.amazon.com/author/axeltracy   / accofina   http://plus.google.com/+accofina   / axel_accofina     / accofina.page   #Accounting #FinancialEducation #Accounting101