路 Which one (cash basis or accrual basis) would you select for a company that has inventory? Why?
路 Does the size of the company make a difference in which basis 鈥?cash or accrual 鈥?is used? Explain how it makes a difference.
路 What would be the advantages and disadvantages of using one basis of accounting over the other?|||In the cash basis actual receipt or payment of cash ( cash includes cheque) is accounted.
Under the accrual method irrespective of the movement of cash, ( receipt / payment ) the Transaction is accounted on the due date. For example If Rent is not paid on the last day of the month, it is accounted by debiting Rent a/c crediting Accounts payable.
As the inventory is already received and payment is not made, it is appropriate to follow the accrual method. The accrual method is good for the company having inventory.
Yes For a bigger company it is advisable to follow the accrual system, otherwise it is very difficult to assess the actual financial position of the Company.
By following the accrual system the correct profit and loss, payable and receivable ( creditors %26amp; debtors position) can be ascertained at any time. This helps for a healthy growth of the company.|||smahadevan is rigt, i found the same answer on this website http://www.expertcontabilbucur鈥?/a> try to visit it, good luck
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