How do you determine net income applying the accrual accounting model?
How do you determine net income applying the accrual accounting model?
Accrual Accounting Model:
This method is a widely used basis of accounting that suggests the timing of recording the transactions. This method is used by larger firms that do not usually deal with cash regularly daily.
Accrual Basis of Accounting suggests that the transactions should be recorded at the period they are earned and not at the time the cash concerning the transaction is received or paid.
It records the transactions in the period the transaction is earned or taken place.
For example, it records revenues earned in the same period the service is provided, even though the cash is not yet received.
Accruals are those expenses and revenues that will affect a company's net income in the given period, although the cash of these revenues and expenses has not changed its hand.
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