Accural Accounting

Accural Accounting

Accrual Method
Rebecca Hunter
HSM/260
November, 23, 2011
Jan-Bridgeford-smith

Accrual Method
  1. Define the accrual system of accounting.
Accrual System of Accounting: Means that transactions are recognized (recorded) when revenues are earned and when expenses are incurred.           Ch. 3 pg. 26
  2. Define the cash basis of accounting.
Cash Basis of Accounting: Mean that transactions are recognized only when cash is received and only when cash is paid out.                                             Ch. 3 pg. 26
  3. Highlight significant differences between the cash and accrual methods.
In the cash basis only cash transactions are recorded and in accrual all transactions are recorded. Another difference would be that you do not have accounts receivable or accounts payable in a cash basis but you would in a accrual.                                                                                                                     Ch. 3 pg.26
  4. Why are nonprofit organizations required to produce financial statement based on the accrual method?
This is because the ability to review and analyze financial statements is a critically important skill for human service administrators. Human service administrators need to be aware at all times of the fiscal health of their agencies in order to make informed management decisions. Members of the board of directors of private nonprofit human service agencies frequently review the financial statements as part of their fiduciary responsibility to safeguard the financial resources of the agency.                                                               Ch. 3 pg. 19
  5. In an accrual system, when you look at the financials, does the cumulative, year-to-date revenue posted on an income statement equal the cash on hand for that period posted on the balance sheet? Why or why not?
No the cumulative, year-to-date revenue posted on the income statement does not equal the cash on hand for the period...