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Business Finance EBK HEALTHCARE FINANCE: AN INTRODUCTIO

The logic behind accruals using an example. Introduction: In accrual accounting, the expenses and revenues are recorded as and when they occur. It reflects accurate financial health of the company as it includes accounts receivable and accounts payable. Accrual accounting does not keep a track of the cash flows. The accruals are created on the balance sheet whenever the obligation for the payment is due is moved to next accounting year. The accruals generally include utility expenses not yet paid, interest due on debt financing and taxes due towards the government authorities. For instance, the staff of S company earns the benefits and wages daily on the basis of work done by them. However the wages are paid by the company once in every two weeks to the staff. Therefore, the clinic owes the wages of its staff for the work performed. Thus, accruals are created on the balance sheet of S company because the obligation for payment of wages has been extended to next accounting year.

The logic behind accruals using an example. Introduction: In accrual accounting, the expenses and revenues are recorded as and when they occur. It reflects accurate financial health of the company as it includes accounts receivable and accounts payable. Accrual accounting does not keep a track of the cash flows. The accruals are created on the balance sheet whenever the obligation for the payment is due is moved to next accounting year. The accruals generally include utility expenses not yet paid, interest due on debt financing and taxes due towards the government authorities. For instance, the staff of S company earns the benefits and wages daily on the basis of work done by them. However the wages are paid by the company once in every two weeks to the staff. Therefore, the clinic owes the wages of its staff for the work performed. Thus, accruals are created on the balance sheet of S company because the obligation for payment of wages has been extended to next accounting year.

Solution Summary: The author explains the logic behind accruals using an example. Accrual accounting reflects accurate financial health of the company.

EBK HEALTHCARE FINANCE: AN INTRODUCTIO

EBK HEALTHCARE FINANCE: AN INTRODUCTIO

6th Edition

ISBN: 9781567938111

Author: Gapenski

Publisher: VST

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EBK HEALTHCARE FINANCE: AN INTRODUCTIO

Ch. 4 - Prob. 1.1STQ Ch. 4 - Prob. 1.2STQ Ch. 4 - Prob. 1.3STQ Ch. 4 - Prob. 1.4STQ Ch. 4 - Prob. 2.1STQ Ch. 4 - Prob. 2.2STQ Ch. 4 - Prob. 2.3STQ Ch. 4 - Prob. 2.4STQ Ch. 4 - Prob. 2.5STQ Ch. 4 - Prob. 3.1STQ

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