It does, because it actually give a more accurate portrayal of a firm's financial position than a cash basis by allowing you to more accurately predict future cash flows.
Under GAAP, the accrual system of accounting is used by investors and banks for financial statements. True or False?
There is no one accounting principle that requires that a transaction be recorded in the period it occurs (commonly referred to as accrual basis accounting). There is a conceptual statement that the Financial Accounting Standard Board has issued with regard to the use of accrual accounting. The Financial Accounting Standards Board has issued STATEMENT OF FINANCIAL ACCOUNTING CONCEPTS NO. 6: ELEMENTS OF FINANCIAL STATEMENTS which states in paragraph 134: Items that qualify under the definitions of elements of financial statements and that meet criteria for recognition and measurement are accounted for and included in financial statements by the use of accrual accounting procedures. The basis of accounting, whether cash basis or accrual, should be disclosed in the notes to the financial statements so that the financial statement reader is aware which method of accounting is in use. Generally accepted accounting principles (GAAP) does require the accrual basis of accounting; nevertheless, businesses can present their financial statements on a cash basis as long as proper disclosures are made. The financial statement opinion rendered by the external audit firm would also disclose that the cash basis of accounting is being used.
Under GAAP, the accrual system of accounting is used by investors and banks for financial statements. True or False?
closing process
yes
advantage modified accrual accounting in government
yes
revenues are earned and expenses are incurred
yes
Accrual accounting is a system which recognizes revenue or expense when it is earned or incurred but not when it is paid or received.
An application of accrual accounting is the notation of expenses as opposed to revenue earned in the same period. Revenue is only shown when it is realized or expected. In accrual accounting assets minus liabilities equals revenue.
answer pliz