Question

Would a professional service firm benefit from an accrual basis financial statement presentation? (5-8 sentences)

Would a professional service firm benefit from an accrual basis financial statement presentation? (5-8 sentences)

Homework Answers

Answer #1
  • A professional service firm would benefit from an accrual basis financial statement presentation as accrual basis financial statements do a good task of matching revenues with expenses for a particular time period.
  • It gives a more clear picture of the actual costs and revenues associated with the time period that are looked at because with cash basis it would be skewed by when the cash was received or paid out.
  • It depicts a better association of revenues and expenses with the related accounting period.
  • The accrual basis of accounting recognizes all item changes whenever they occur.
  • Auditors of a professional audit service firm can only certify the statements if a corporation uses accrual basis financial statement presentation.
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