![]() Under the accrual method, you need to recognize the utility expense in July because the electricity consumption is for the month of July. To illustrate, let’s assume your business received an electric bill for the month of July, and its due date is on August 10. Accounting standards of the United States generally accepted accounting principles (GAAP) mainly use this method, especially when dealing with complex accounting transactions like foreign currency translations, hedging, and investment accounting. The accrual method recognizes income and expenses when earned or incurred. Since all revenues and expenses are recorded when cash is received or paid, the net income is also the net increase in cash during the period. Requires simplified financial reporting: The cash-basis income statement replaces the cash flow statement under the cash method. ![]()
0 Comments
Leave a Reply. |