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Please see this example to clarify
¨Nassau Corporation experienced the following activity last year:
¨Now contrast the differences in performance under the accounting method versus the cash method.
INCOME STATEMENT SUMMARY
ACCRUAL CASH
Sales $100,000 $ 0
Less: Costs (80,000) (80,000)
Net Profit/(Loss) $ 20,000 $(80,000)
Sir only minor variations generally.
Accruall Basis
All accrued revenues and expenses are booked to get the net results of business
Cash Basis
only revenues and expenses are booked when they are incurred.
Differences
A great differences in profits will come each year.
Good question and answer to learn
Sir, In india as per the companies act2013, only mercantile system is allowed. and also as per accounting standard9 issued ICAI, Revenue recognition should be on accrual basis, if the risk and reward of the goods trasferred to customers.