The modified cash basis of accounting uses elements of both the cash basis and accrual
basis of accounting. The cash basis you recognize a transaction when there is either incoming
cash or outgoing cash. The receipt of cash from a customer triggers the recordation of revenue,
while the payment of a supplier triggers the recordation of an asset or expense. The accrual
basis you record revenue when it is earned and expenses when they are incurred, irrespective
of any changes in cash. Accrual accounting is an accounting method that measures the
performance and position of a company by recognizing economic events regardless of when
cash transactions occur. Modified cash basis is an accounting method that combines …show more content…
Cash basis a
major accounting method that recognizes revenues and expenses at the time physical cash is
actually received or paid …show more content…
Accrual basis accounting is more popular than cash basis accounting because it produces
more accurate. More faithful financial statements that constitute better representations of
actual circumstances than its main competitor. By contrast, the use of cash basis can lead to
distributers due to the collection of cash and cash equivalents not aligning with the actual
timing of sales. Disadvantages of accrual basis accounting the single most important issue in
accrual basis accounting is that it requires transactions to be recorded at the times of their
occurrence. An entire set of rules and regulations have grown up and ground these
uncertainties in order to guide their accounting which means the accrual basis accounting is
harder to perform than cash basis accounting.
The accrual cash basis seemed the easiest to work with. That method records revenues
and expenses when they are incurred regardless of when cash is exchanged. With the accrual
methods income and expenses are recorded as they occur regardless of whether or not cash
has actually changed hands. Under the cash basis of accounting revenues are reported on the
income statement when the cash is