Question

QUESTION 10 Why do accrual basis financial statements provide more useful information than cash-basis statements? TTT Anal 3 (12pt) THEHES Path:p Words:0 QUESTION 11 Quinn Becker is president of Better Books. She has no accounting background. Becker cannot understand why fair value is not used as the basis for all accounting measurement and reporting. Discuss.

Answer 1

1. The first thing businesses go for accrual system than cash system is that, in accrual the expenses of every period are matched exactly with the revenue that is expense and revenue are booked in the period of their occurence rather than when they are paid or received. So that the net income will show the exact true value of income.
2. Though cash basis is very easier to follow, accrual accounting is the widely accepted method and followed mostly by all organisations around the world.
3. Another difference that may be noted between the two methods is that the tax will be different in both the scenarios.
4. By following accrual based financial statements we can make sure that we are comparable with other entities around the world to know the performance differences and many other things.