Week 2: The Accounting System and Accrual Accounting – Discussion
Accrual vs. Cash Accounting (graded)
US GAAP dictates that all financial accounting use accrual accounting. This means that if a company must use accrual accounting if they want to state that their financial statements are in accordance with US GAAP. However, some companies, particularly smaller, privately-owned companies, use cash accounting.
What is the difference between accrual and cash accounting? Which accounting method do you prefer and why?