Project Milestone 02

In this short paper, after differentiating between accrual accounting and cash basis methods, you will recommend an accounting method for the client described in the final project. Based on your recommendation, determine when revenue would be recognized on the sale of inventory and how this impacts the client’s financial situation

Specifically, the following critical elements must be addressed:

A. Differentiate between accrual accounting and cash basis. Based on the type of business and the client’s accounting system, what is the impact when revenue is recognized? Which option would you recommend for the client?

B. Based on the decision of accrual vs. cash basis, describe when revenue would be recognized on the sale of inventory, and how the accrual reporting differs from cash basis.

C. Determine the economic impact on the client’s financial situation. Based on your decision, determine the potential tax liability, keeping in mind appropriate Internal Revenue Code and Treasury regulations.

D. Summarize the cash or accrual accounting method in relation to the selected business entity. 

Guidelines for Submission: Your paper must be submitted as a 2 page Microsoft Word document with double spacing, 12-point Times New Roman font, oneinch margins, and at least three sources cited in APA format