Question

Will there be a difference in the cycles if the firm is cash basis as compared to an accrual basis firm?

Answer 1

Yes, there will be differences in the cycles if the firm follows cash basis as compare to accrual basis. In Accurual accounting revenue and expenses are recoreded when they occur. In cash accounting, these are recorded when cash exchanges. For eg. If we are in the business of machine sales. A machinery is sold for $50000. In accrual accounting, this transaction will recoreded immediately when sale is made, in cash basis it will not be recorded untill cash is received. In accrual accounting we will have payable and receivables, in cash accounting we done have payable and receivables as we recored transactions only on receipt payment of cash.