Accounting Class Participation
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wk1_dq1.docxK ONE - DISCUSSION QUESTION # 1
posted by Linda Moore
Aug 19, 2014, 12:40 AM
WEEK # 1: Class: Please post your responses to the following discussion question:
DQ # 1: DISCUSS THE MEANING OF CASH VS. ACCRUAL ACCOUNTING.
· Comment on Aug 19, 2014, 8:09 AM
Re: WEEK ONE - DISCUSSION QUESTION # 1
posted by DONALD DENNIS
Aug 19, 2014, 8:09 AM
The cash method and the accrual method (or sometimes called cash basis or accrual basis) are two main methods of keeping track of a business's income and expenses. Each method will have their pros and their cons, but it's all about what method will benefit the business the most. Each method only is different in terms of timing of each transaction. This includes the sales and purchases, as well as credit and debits to and from your accounts.
The cash method is more commonly used, and is more times than not used for small business. In regards to the cash method, income is not counted until cash (of some form) is actually received. Expenses are not counted until they are paid.
The accrual method is used for larger business or corporations. Transaction are counted when an order is made, item delivered or service are being worked on. Meaning by this, the income is counted when the sale occurs. Expenses are counted when you receive the good or service. Actual money doesn't have to be seen, and the actual money isn't counted for or against your checking account to record that transaction.
I have seen this happen from time to time as a buyer. When I use PayPal or even shop at a particular store, sometimes it takes a couple days for the actual transaction to post to my account, although the store has received my order and is in the process of completing my order even before money is taken out of my account (the store probably hasn't seen money yet either).
· Comment on Aug 19, 2014, 6:59 PM
Re: WEEK ONE - DISCUSSION QUESTION # 1
posted by Linda Moore
Aug 19, 2014, 6:59 PM
Donald - Good synopsis! The Accrual method is a better matching method in many instances. We see that sales and expenses happen and are recorded in the same month; whereas if we wait for the accounts receivable or payable to happen, that is cash to change hands, this will result in another month. Small business has many instances that we see cash transactions that match regardless. However, in a larger more complex organization, it is essential to capture matching transactions, to be able to see the true picture of the profits or losses.
Comments / Questions?
· Comment on Aug 19, 2014, 8:00 PM
Re: WEEK ONE - DISCUSSION QUESTION # 1
posted by Mark Pollack
Aug 19, 2014, 8:00 PM
Question: Do companies have to factor nonpayment or slow payment if they use the accrual method? I would imagine there are calculated risks by not counting revenue by whats on hand.
· Comment on Aug 20, 2014, 9:05 PM
Re: WEEK ONE - DISCUSSION QUESTION # 1
posted by Linda Moore
Aug 20, 2014, 9:05 PM
Mark - yes, there has to be a way to include those "not paying" which would be "uncollectible accounts expense". If you have a lot of sales, you also can set up an "allowance for uncollectible accounts" as a percentage of sales, for example. We may have sales or revenue in our organization but we also have to be careful that we are selling "on account" to those who will indeed pay us. If our credit is too easy, we may get sales that won't be collectible.
Good Post! Class: Comments / Questions?
· Comment on Aug 21, 2014, 5:52 PM
Re: WEEK ONE - DISCUSSION QUESTION # 1
posted by JASON YORGENSEN
Aug 21, 2014, 5:52 PM
Class,
I agree with this post. Working in a bank I can see how this will apply. It is interesting when you see a number of companies that have financing for there product. Those companies push the fact that they will approve anyone no matter what the credit. This type of advertising will attract any type of person. The issue will be there ability to pay the loan or credit product back. What I think is unique is some of those companies will use an independent companies to get the financing through. This is a good business model for the company because they get paid and the risk moves over to the loan company.
Jason Yorgensen
· Comment on Aug 22, 2014, 11:37 PM
Re: WEEK ONE - DISCUSSION QUESTION # 1
posted by Linda Moore
Aug 22, 2014, 11:37 PM
Jason - the fact remains that if there are too many of these bad loans, the loan company or bank will not survive. In our current economy, we saw this with so many foreclosures, and we will take a long time to recover. We are starting to see some improvement, but the banks will be extra cautious for a long time. In your bank, I am sure you see this happening, and the business has to make money so the bank has to give out loans. However, the bank has to keep going, because without loans, there is no hope of them earning interest revenue.
· Comment on Aug 24, 2014, 8:24 AM
Re: WEEK ONE - DISCUSSION QUESTION # 1
posted by JOHN RUIZ
Aug 24, 2014, 8:24 AM
This is something that has really hit home for myself as I just started a new career this month at Mattress Firm and we work with 3 different financing companies that provide several different types of interest free financing loans for various periods. At Mattress Firm we can get a bed financed to anyone, but it does not mean that you can actually afford the monthly payment. It really comes down to you knowing your monthly expenses and if you can afford to pay anywhere between $45 to $180 a month for a bed for any where between 90 days to 6 years. Most financial lenders will provide the funds, but you have to really ask yourself if you can afford the payments.
· Comment on Aug 24, 2014, 9:00 PM
Re: WEEK ONE - DISCUSSION QUESTION # 1
posted by JEREMY ECKLIN
Aug 24, 2014, 9:00 PM
John, your example also hits home with me. I actually regularly use zero interest financing for various large purchases the last few years. So far, I have been able to beat the bet if you will and pay off the debt prior to zero interest incentive expiration. I do understand the risks associated with this kind of financing. For example, a few years ago, I was interested in purchasing a new television and was offered a 36 month zero interest card with Best Buy to make the purchase. I took the offer and was able to afford the monthly payment in order to pay off the debt prior to the interest spike after three years. While I have been able to take advantage of these offers so far, I can see the risk involved in these offers especially if someone takes on multiple lines of credit at the same time. So, as you point out, many financial lenders will provide funds to potential borrowers, but the borrower needs to understand the consequences if they are unable to afford the monthly payments.
· Comment on Aug 23, 2014, 9:42 PM
Re: WEEK ONE - DISCUSSION QUESTION # 1
posted by SARA MARKEL
Aug 23, 2014, 9:42 PM
I see this in my company with the amount of sales and merchandise we sell every week due to the pre-billing and the allotted amount allow to pre bill to company. I see it's with the grocery trucks because those trucks are delivered everyday and can be very pertinent to the amount of onhands that are needed to keep up with the demand of consumables items. Good Post!
· Comment on Aug 20, 2014, 5:38 AM
Re: WEEK ONE - DISCUSSION QUESTION # 1
posted by ANDREW WAREING
Aug 20, 2014, 5:38 AM
The cash method is often used by small businesses. It is based on the method that income is not counted until the cash is received and expenses are not counted until they are paid. The accrual method recognizes transactions when the order is made regardless of when the money is actually received. The accrual method must be used if a business has sales of $5 million or more. It is used by larger businesses as it allows the organization to obtain greater insights into the flow of revenues and expenses.
Cash vs. Accrual Accounting. (2014). Retrieved from http://www.nolo.com/legal-encyclopedia/accounting's-29513.html
· Comment on Aug 20, 2014, 11:17 PM
Re: WEEK ONE - DISCUSSION QUESTION # 1
posted by Linda Moore
Aug 20, 2014, 11:17 PM
Andrew - good post! In order for a large organization to understand how they are doing, they must use accrual accounting. In order to get good and matched numbers, you have to be able to have the transactions together within the period that they occur; such as revenues and expenses. This tells us how much we have made, and what it cost us for those particular sales levels.
· Comment on Aug 21, 2014, 6:13 AM
Re: WEEK ONE - DISCUSSION QUESTION # 1
posted by ANDREW WAREING
Aug 21, 2014, 6:13 AM
Linda - I read an article that referenced some research from Criterion Research Group LLC. The research showed that many companies overestimate the amount of accruals. This can lead to a misleading representation of the financial health of the organization. In some worst cases, where companies made significant errors, class action lawsuits were made by shareholders. In summary, the study showed that companies that use more accruals actually underperform companies with fewer accruals.
I guess there is a balance when calculating accruals that ensures good accounting practices are adhered to?
Colter, G. (2004). Accrual Accounting Can Be Costly. Retrieved from http://online.wsj.com/news/articles/SB108871005216853178
· Comment on Aug 24, 2014, 8:30 AM
Re: WEEK ONE - DISCUSSION QUESTION # 1
posted by JOHN RUIZ
Aug 24, 2014, 8:30 AM
It really seems like either method can be used at any level of company, but even though accrual accounting provides a bigger picture, it seems to come with a few risks. It seems that in order for a company to really be able to latch onto the concept of aggressive expansion, it really does need to use accrual accounting as the big picture always allows for ore realistic ideas of what can actually be done and what cannot. Living by cash accounting alone seems simple enough, but it hinders the concept of clear images of forecasting as it only track what has either been received or paid and not what will be.
· Comment on Aug 24, 2014, 8:17 AM
Re: WEEK ONE - DISCUSSION QUESTION # 1
posted by JOHN RUIZ
Aug 24, 2014, 8:17 AM
When it comes to accounting I am able to see the benefits of accrual accounting and cash accounting, but also the draw backs from both systems of accounting. It really seems like a system of cash accounting for receivables and accrual accounting for expenditures really would be better than just using one or another. It is a great idea to know what should be coming your way, but there are so many times when deals are made, contracts are signed, and then the cash never comes. Depending or planning on what is not actually in hand can lead to some really bad decision making. On the expenditure side however, you should plan to always pay what is owed and so your budget really should revolve around you only spending after all expenditures have been accounted for.
· Comment on Aug 24, 2014, 5:52 PM
Re: WEEK ONE - DISCUSSION QUESTION # 1
posted by TIFFANY MINGO
Aug 24, 2014, 5:52 PM
Good explanations and points Donald. I definitely see both methods in everyday or monthly transactions I make. A good example is something like a food or clothes transaction where the money is given and taken in account right away. Other examples are monthly accrual transactions that I have like gym memberships where you are able to use the facility before the money is taken from your account. I think both methods are efficient and are accommodating to us because it is not always easy or on hand to pay for the product or service.
· Comment on Aug 19, 2014, 7:21 PM
posted by patricia surber
Aug 19, 2014, 7:21 PM
Every company has an accounting period which is one year long that is called a fiscal year. That fiscal year does not have to start at the beginning and end of the calendar year because it can begin at anytime of the year. Many companies want to end their fiscal year when they are not busy because gathering the information for their accounting purposes takes time. Many companies want to end their fiscal year when their inventory is low because it is easier to compile accounting data at these times. Accrual accounting is an assumption that helps develop accounting standards. The accrual accounting takes place at the times that events occur so the financial statements are recorded at these times. These financial statements are compiled through revenue and expenses. The cash accounting are receipts that are recorded during the fiscal year in the form of cash that is used by small businesses because it is easier and they can see what money they have right away.
· Comment on Aug 22, 2014, 7:39 AM
posted by SARA MARKEL
Aug 22, 2014, 7:39 AM
Patricia,
This is something my company Wal-Mart does when inventory Is at it low, The fiscal years starts in Feb. Its funny you say this because it relates as to why the book inventory is the lowest, coming out of a major holidays and clearance, the backroom is not as full, my store runs with about 7 million in inventory at any given time and it fluctuate throughout the upcoming events or holidays. I have seen it at 7 million and then a month later drop to 4 million depending on the warehouses and the events taking place. Great Post.
· Comment on Aug 24, 2014, 5:26 PM
Response from Patricia to Sara
posted by patricia surber
Aug 24, 2014, 5:26 PM
Hello Sara:
I know that making calculations when inventory is low would be much easier than when the whole warehouse is full. I work in the HR department and financial calculations usually ends when the project ends. If the project is a continuous yearly affair then the calculations are done every quarter from the beginning of the project no matter when the project began in the year. The calculations are needed no mater how business or slow we are. So if a company can do calculations when the inventory is smaller than they are lucky.
· Comment on Aug 24, 2014, 6:01 PM
posted by TIFFANY MINGO
Aug 24, 2014, 6:01 PM
I agree, companies have their fiscal year at different times of the year depending on things such as inventory and when they want to look at their income statements and balance sheets. I know certain businesses we deal with have their fiscal years at the end or first of the new year as the 12 months is the time period they are looking at before making decisions for the new year. I always wondered what specific reasons companies had for their fiscal years at different times and from this chapter I learned they do not always have a choice as it is based on when the industry started. Also, I learned that they tend to not pull their reports when there is "down time" or when things are requiring work and attention. They want to know when there numbers are the best and why it works so well that way.
· Comment on Aug 19, 2014, 7:58 PM
Re: WEEK ONE - DISCUSSION QUESTION # 1
posted by Mark Pollack
Aug 19, 2014, 7:58 PM
The cash method and the accrual method seem to differ on when the income is actually earned. For clarity, the cash method only recognizes the sale once the cash or check has cleared into the account of the business. This method is typically used in small businesses. As a former business owner, we used this method to calculate profitability because we did not have the capital or the resources to chase debtors.
The accrual method accounts for the income the moment the order is placed. If we think about large organizations, like Best Buy, they would possible count the sales the moment the order was placed online regardless of payment. This process is also true for any product or services completed. Large organizations have the financial ability to recognize profits from this point versus a smaller company.
I owned an animal hospital and we were a cash upfront organization. Our company did not have deep pockets or credit departments to chase those who owed us for services rendered.
· Comment on Aug 22, 2014, 7:43 AM
Re: WEEK ONE - DISCUSSION QUESTION # 1
posted by SARA MARKEL
Aug 22, 2014, 7:43 AM
Mark,
What about emergencies and people who just can't afford to pay for the emergency care needed for there loved one (Fury Friends). DO you offer another source such as care credit for financing. Do you allow for payment over time?
Emergency is something people don't plan for and just saying if they found this animal hurt and tried to be a good neighbor, would you offer a discount rate for helping out an injured animal. Having this type of compassion for the animal instead of the dollar amount will lead to trust in knowing to take the injured animal to you and your team and knowing that they can afford the care will get them to refer you to there friends and family which in turn will lead to better revenue and profit for you business I would think, just asking.
· Comment on Aug 24, 2014, 4:17 PM
Re: WEEK ONE - DISCUSSION QUESTION # 1
posted by Mark Pollack
Aug 24, 2014, 4:17 PM
Hi Sara,
Great post and question. Yes, we would offer care credit, but we also had an angel fund. We had a weathy client donate $2,000 to this fund and ask people if they would like to donate. If a pet comes in and is in need of a surgery or service, we first really determine need. We do go through a vetting process to make sure we are using the money correctly, and then perform the service.
From an accounting standpoint, we keep the money in a separate account and the accountant "sees" it only when it is processed to cover a service. I hope this answers your question.
· Comment on Aug 20, 2014, 3:56 PM
Re: WEEK ONE - DISCUSSION QUESTION # 1
posted by JASON YORGENSEN
Aug 20, 2014, 3:56 PM
Class,
The cash and accrual method of accounting are two ways that businesses can evaluate orders. The cash method is one that is used for smaller or start up businesses. It will only count and order or income when it is paid for by the customer. This means that it will not count things when cash, check, credit/debit are not used. The benefit for using the method with smaller businesses is to ensure that they are not counting things as income and overspending. Especially if it is something where the customer will change there mind before or after the order is placed. This can cost the business money in the long run and possibly impact other customers.
The accrual method happens when transactions or orders are counted when it is received from the customer. In this form of accounting it does not matter when the item is paid for it can be before or after the item is delivered. This can be risky for businesses because the customer can change there mind at any moment costing the business money on a product or service. Also if the customer does not want to pay after the product or service is preformed it can go into legal ramifications.
Jason Yorgensen
· Comment on Aug 22, 2014, 3:22 PM
Re: WEEK ONE - DISCUSSION QUESTION # 1
posted by TIFFANY MINGO
Aug 22, 2014, 3:22 PM
Overall I believe the cash method is used more among companies because in this circumstance money does not have value or is not put within the system until it is received. This goes the same for someone in the accounts payable department where they do not count something as an expense until it is paid. On the other hand the accrual method is where when the sale occurs you consider it paid and that you have the income. For expenses it is when the service or good is given and you may have not received payment for it yet.
In the accounting department we majority of the time use the cash method when taking in checks, but sometimes we have what is called a work ticket where we go and perform special work and it is invoiced and enough it may not have been paid yet we will accrue for it assuming the money will be coming per the terms of the contract set up.
· Comment on Aug 23, 2014, 9:01 PM
Re: WEEK ONE - DISCUSSION QUESTION # 1
posted by JOHN RUIZ
Aug 23, 2014, 9:01 PM
As businesses conduct their accounting practices they use one of the accounting systems of either cash accounting or accrual accounting. The first form of cash accounting is the simplest form of accounting as this systems function similarly to individual checkbook practices. Cash accounting revolves solely around actual complete cash practices of either money actually received or of payments completed. Cash accounting does not track or take into consideration any possible future payments due to services rendered. It is all about what is actually in or what is actually out.
Future transactions are taken into consideration through the system practices of Accrual accounting. In accrual accounting unlike in cash accounting where you only track what has been received, you book all forms of revenue as soon as deal or contract has been made. The same is applied to expenses as they are accounted for as soon a deal is struck or acceptance has been made for an obligation to pay. There are both pros and cons to either system of accounting as cash accounting is very specific to what is happening at the very moment, but accrual accounting provides a better concept of what the future possible holds, but is hard to rely on as promises are not always kept.
· Comment on Aug 23, 2014, 10:19 PM
Re: WEEK ONE - DISCUSSION QUESTION # 1
posted by JEREMY ECKLIN
Aug 23, 2014, 10:19 PM
Cash accounting involves accounting for and assigning receipts during periods which they were received and expenses during periods which they were paid on the financial statements. Conversely, accrual accounting involves recording receipts and expenses when they are incurred instead of when they actually cleared. Accrual accounting is important for most corporations, especially those who produce products with large and lengthy production cycles, often of more than one year. For example, if Boeing received an order to create twenty new 747 Class Jetliner's, and they used cash accounting, their business would appear to lose money during the production cycle because the company would incur high costs due to production without accounting for any revenue. As a result, Boeing uses accrual accounting to report their revenue and expenses when they are incurred in order to demonstrate the true value of their operations and income potential. While most large corporations use accrual accounting to most accurately report their earnings and expenses, small businesses may find cash accounting more useful in order to better follow cash flows and available cash for expenses and investment. It is important to understand which form of accounting was used on financial statements about a business in order to make accurately informed financing and investing decisions about a business.
· Comment on Aug 23, 2014, 10:50 PM
Re: WEEK ONE - DISCUSSION QUESTION # 1
posted by Robert Peck
Aug 23, 2014, 10:50 PM
Cash basis accounting is a method of accounting used when a payment is received for the trade of goods or services, a deposit is made, and the revenue is recorded as of the date of the receipt of funds no matter when the sale was made. When using cash basis accounting financial statements display revenues and expenses based on when transactions are entered rather than when revenues were earned or expenses incurred. For example, if my company obtains a huge contract for business during the year but will not get paid until the contract is complete. However, during the year we incur expenses as they happen. So in a nut shell one year our expenses may be larger than our profits due to the contract not being completed until a later date in the future all the while our expenses are being recorded as they occur in the calendar year. this method of tracking expenses and revenue may be simple but it may cause your organizations finances to appear as a profit or loss.
Accrual basis accounting is a method of accounting used when revenue is earned; revenue is earned when goods are delivered or services are performed; and cash is received. All expenses are recognized during the time the revenue is recognized. Financial statements match revenues to the expenses incurred in earning them. This method provides a better picture of organization or company's current economic situation. For example, if company A sells 500 widgets to company B for $10,000 on June 1st and cash is received on June 10th. Company A's financial records will reflect the revenue from the sale being recognized on June 1st although the cash is not received until June 10 this process allows for a clearer picture of the company's revenue and expenses.
· Comment on Aug 23, 2014, 11:33 PM
Re: WEEK ONE - DISCUSSION QUESTION # 1
posted by EIMI YAMADA
Aug 23, 2014, 11:33 PM
Cash accounting is generally used by small businesses. In the cash method, the income is counted towards the business income once the actual payment is made. Not when the service is rendered. For instance, if a company provides a service in March, but is not paid until May, that income would be counted as May income, and not as March income, even though the service was completed in March. The income is counted when it is actually received.
In Accrual income, the income is counted when the service is rendered or when the transaction occurs. Though the company many not get the money for a couple months, the income is counted right away. It is not counted when it is actually received. This works for many large companies, in order to properly track transactions as they occur.
The most important thing is that a business sticks with one method. If both methods are used, it can easily cause tracking issues for the company. In order to keep payments tracked, the business needs to decide which method works better for their system, and stick with that one method in order to properly track sales, goods, sold, payments, and services rendered.
· Comment on Aug 24, 2014, 12:28 PM
Re: WEEK ONE - DISCUSSION QUESTION # 1
posted by KATIE LE
Aug 24, 2014, 12:28 PM
Very nice explanation. To me, I believe the cash method is easier and make more sense when it comes to dealing with the IRS. The cash method only record when the money is received. Not so with accrual-basis. If you get a huge purchase order from a new customer, that would show as income; then the IRS wants their 30%, 40%, etc., but since the customer hasn’t paid, you have to pay the taxes from your pocket. This method will not benefit small businesses.
· Comment on Aug 24, 2014, 8:51 PM
Re: WEEK ONE - DISCUSSION QUESTION # 1
posted by JEREMY ECKLIN
Aug 24, 2014, 8:51 PM
Eimi, your explanations of the differences were spot on. I specifically liked how you point out the importance of choosing a method and sticking with it. It is important for a company to use one type of accounting throughout all of their financial reports in order to provide relevant and faithful representation of the information. So, companies should use the system which bests fits the model of their company. As a result, small business, whether partnerships or sole proprietorships, usually benefit from cash accounting, where large corporations benefit from accrual accounting. That being said, while consistency is important within the financial reports, internal users may find certain uses from evaluating the company's financial position from both accrual and cash accounting perspectives. I could see how there may be value in assessing the information and data from each point of view in order to better understand the ebbs and flows of costs associated with production and revenue generated from sales. Do you think there could be some value for internal users of the financial reports from both perspectives?
· Comment on Aug 24, 2014, 7:44 AM
Anna: WEEK ONE - DISCUSSION QUESTION # 1
posted by ANNA WEBB
Aug 24, 2014, 7:44 AM
A company using cash-basis accounting will only document revenue once the cash is received. Alternatively, the accrual basis accounting method records both revenue and expenses as the events occur. Accrual basis accounting is the preferred method because of its revenue and expense recognition principles that is not followed when using cash-basis accounting. A company's true financial performance under cash-basis will not be accurate because the resulting numbers when using cash-basis may be misleading.
· Comment on Aug 24, 2014, 6:12 PM
Re: Anna: WEEK ONE - DISCUSSION QUESTION # 1
posted by JASON YORGENSEN
Aug 24, 2014, 6:12 PM
Class,
I almost wonder is there is more risk when using a cash based accounting system. I would like to see what the statistics are for businesses that do not document everything that was sold in the company. I know that businesses are always looking to save money with tax deductions or giving money to charities. I would imagine with a cash based system they could hide some of that money that came into the company or not report it. I would think this would be difficult with any other accounting system because there are records of people waiting for orders.
Jason Yorgensen
· Comment on Aug 24, 2014, 12:21 PM
WEEK ONE - DISCUSSION QUESTION # 1
posted by KATIE LE
Aug 24, 2014, 12:21 PM
The main difference between accrual and cash basis accounting is the timing of when revenue and expenses are recognized. The cash method is most used by small businesses and for personal finances. The cash method accounts for revenue only when the money is received and for expenses only when the money is paid out. On the other hand, the accrual method accounts for revenue when it is earned and expenses goods and services when they are incurred. The revenue is recorded even if cash has not been recieved or if expenses have been incurred but no cash has been paid. Accrual accounting is the most common method used by businesses.
Reference:
http://www.investopedia.com/ask/answers/09/accrual-accounting.asp
· Comment on Aug 24, 2014, 5:45 PM
Re: WEEK ONE - DISCUSSION QUESTION # 1
posted by SARA HOMSI
Aug 24, 2014, 5:45 PM
The cash method is the more commonly used method of accounting in small business. Under the cash method, income is not counted until cash (or a check) is actually received, and expenses are not counted until they are actually paid. Under the accrual method, transactions are counted when the order is made, the item is delivered, or the services occur, regardless of when the money for them (receivables) is actually received or paid. In other words, income is counted when the sale occurs, and expenses are counted when you receive the goods or services. You don't have to wait until you see the money, or actually pay money out of your checking account, to record a transaction.
http://www.nolo.com/legal-encyclopedia/cash-vs-accrual-accounting-29513.html
· Comment on Aug 24, 2014, 8:04 PM
Re: WEEK ONE - DISCUSSION QUESTION # 1
Aug 24, 2014, 8:04 PM
The difference between Cash Accounting and Accrual Accounting is as follows:
Cash Accounting processes transactions when cash is exchanged
Accrual Accounting processes transactions as orders are placed or shipped.
The company I work for operates their business on an accrual basis and this is easy for me to understand when I am paying invoices. We pay invoices on specific terms, but essentially we count the money going out as already being paid out when I process the invoice. From the time I code and submit an invoice to the time the supplier receives the check and the check passes through the bank into their account can be more than 30 days.
I operate my personal finances on a Cash basis. I do not consider myself having funds in my checking account before I receive my paycheck. I wait until the funds being deposited into my account pass through the bank before I consider myself having it.
