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  • Cash Basis To Accrual Basis of Accounting

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    mary grace abris
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    The document compares and contrasts the cash basis and accrual basis of accounting. It provides definitions for each basis: - Under the cash basis, income is recognized when cash is received and expenses when cash is paid. - Under the accrual basis, the effects of transactions are recognized when they occur, regardless of cash receipt or payment. Income and expenses are recorded in the periods to which they relate. The document then provides a table outlining how specific items such as sales, purchases, cost of goods sold, income, expenses, taxes, and depreciation are treated under each basis. It also includes illustrations with examples of calculating items under both the cash and accrual methods.

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    The document compares and contrasts the cash basis and accrual basis of accounting. It provides definitions for each basis: - Under the cash basis, income is recognized when cash is received and expenses when cash is paid. - Under the accrual basis, the effects of transactions are recognized when they occur, regardless of cash receipt or payment. Income and expenses are recorded in the periods to which they relate. The document then provides a table outlining how specific items such as sales, purchases, cost of goods sold, income, expenses, taxes, and depreciation are treated under each basis. It also includes illustrations with examples of calculating items under both the cash and accrual methods.

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    © All Rights Reserved
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    10 views15 pages

    Cash Basis To Accrual Basis of Accounting

    Uploaded by

    mary grace abris
    The document compares and contrasts the cash basis and accrual basis of accounting. It provides definitions for each basis: - Under the cash basis, income is recognized when cash is received and expenses when cash is paid. - Under the accrual basis, the effects of transactions are recognized when they occur, regardless of cash receipt or payment. Income and expenses are recorded in the periods to which they relate. The document then provides a table outlining how specific items such as sales, purchases, cost of goods sold, income, expenses, taxes, and depreciation are treated under each basis. It also includes illustrations with examples of calculating items under both the cash and accrual methods.

    Copyright:

    © All Rights Reserved
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    of 15

    CASH BASIS TO ACCRUAL

    BASIS OF ACCOUNTING
    ACCRUAL BASIS OF ACCOUNTING

    The Standards provide that under the accrual basis of accounting, "the
    effects of transactions and other events are recognized when they occur
    (and not as cash or its equivalent is received or paid) and they are
    recorded in the accounting records and reported in the financial
    statements of the periods to which they relate."
    CASH BASIS OF ACCOUNTING

    Under the cash basis of accounting, income is recognized only when


    cash is received and expense is recognized only when cash is paid.
    ACCRUAL BASIS VS CASH BASIS OF ACCOUNTING
    ITEM CASH BASIS ACCRUAL BASIS
    Sales Cash sales plus cash collections on Cash sales plus sales on account
    trade receivables plus advances
    received from customers

    Purchases Cash purchases plus on trade payables Cash purchases plus purchases on
    plus advances paid to suppliers account.
    Cost of Goods Sold Cash basis purchases adjusted for Accrual basis purchases adjusted for
    changes in beginning and ending changes in beginning and ending
    inventories. inventories.
    Other Items of Income Income includes only those that are Income includes all items earned
    received in cash. regardless of whether or not cash is
    received.
    Other Items of Expenses Expense includes only those that are Expense includes all items incurred
    paid in cash. regardless of whether or not cash is
    paid.
    ACCRUAL BASIS VS CASH BASIS OF ACCOUNTING
    ITEM CASH BASIS ACCRUAL BASIS
    Income Tax Expense Income tax expense is recognized only Income tax expense is recognized
    for payments made. considering deferred tax expense
    (benefit).
    Depreciation Depreciation is provided normally. Depreciation is provided normally.
    Bad Debts No bad debts are recognized because Bad debts are recognized for
    receivables are not recognized. receivables whose collection is doubtful.
    Amortization of Discount or Premium on No discount or premium is recognized. The effective interest method is used for
    Financial Instruments Interest income or expense is financial instruments measured at
    recognized for cash collections or amortized cost.
    payments.
    Fairvalue gains or losses on assets Not recognized Recognized
    and liabilities accounted for at fair value
    as required or permitted under PFRS
    Other Comprehensive Income Not recognized Recognized
    ILLUSTRATIONS: SALES

    Compute for the following:


    1. Net Sales under cash basis of accounting.
    2. Nets sales under accrual basis of accounting
    NET SALES UNDER CASH BASIS

    NET SALES UNDER ACCRUAL BASIS


    ILLUSTRATIONS: COST OF GOODS SOLD

    Compute for the following:


    1. Net Purchases and CGS under cash basis of accounting.
    2. Nets Purchases and CGS under accrual basis of accounting
    NET PURCHASES UNDER CASH BASIS

    COST OF GOODS SOLD UNDER CASH BASIS


    NET PURCHASES UNDER ACCRUAL BASIS

    COST OF GOODS SOLD UNDER ACCRUAL BASIS


    ILLUSTRATION OTHER ITEMS OF INCOME

    Compute for the rental income under


    1. Cash basis of accounting.
    2. Accrual basis of accounting
    RENTAL INCOME UNDER CASH BASIS

    Rental Payment Received P 1,000,000.00

    RENTAL INCOME UNDER ACCRUAL BASIS


    ILLUSTRATION OTHER ITEMS OF EXPENSE

    Compute for the insurance expenses under accrual basis.


    ILLUSTRATION OTHER ITEMS OF EXPENSE
    THANK YOU.

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