Question

What accounting method do you think most businesses use and why?

Answer 1

Most businesses use accrual accounting because it is not possible to do cash accounting (actual cash received and paid). Accrual accounting recognizes revenues and expenses when they occur rather than when actual cash is exchanged.

In order to expand, or even to survive, most businesses will depend on credit. Accrual accounting allows companies to record and measure credit – both credit owing as well as owed. This is not possible in cash accounting.

Business will run on credit, on both purchases and on sold goods. therefore to match the acconts, they have to choose accrual accounting.