Accrual Basis Method of Accounting: Accrual basis of accounting is a method wherein the business transactions are recorded in accounting books on accrual basis that is when revenue is earned or expenses are incurred irrespective of cash being received or payment being made for the respective transactions. Cash Basis Method of Accounting: Cash basis of accounting is a method wherein the business transactions are recorded in the accounting books only when cash is received or cash payment is made for the respective transactions. To Identify: Reason for accrual Basis of accounting preferred over the cash basis.

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Chapter 3, Problem 2DQ

To determine

Accrual Basis Method of Accounting: Accrual basis of accounting is a method wherein the business transactions are recorded in accounting books on accrual basis that is when revenue is earned or expenses are incurred irrespective of cash being received or payment being made for the respective transactions.

Cash Basis Method of Accounting: Cash basis of accounting is a method wherein the business transactions are recorded in the accounting books only when cash is received or cash payment is made for the respective transactions.

To Identify: Reason for accrual Basis of accounting preferred over the cash basis.

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