Accrual and Cash Basis True Or False?

True & False Both.

True

Transactions without cash involvement will generate different results under both the systems.

False

Transactions done in cash will generate the same results under both the systems.

The answer is Yes. they lead to a different result if used in the same situations.

Why? what's a key differences ? 

Here is the explanation... 

The cash-basis and accrual-basis are two different approaches that bookkeepers can use to record the financial transactions of a business. 

The major difference between the accrual accounting method and the cash accounting method is the way in which revenue and expenses are recorded in the accounts of the business. This difference consequently leads to a different profit result for a given period depending on the approach adopted. This difference is detailed below:

·         Cash-basis - Using the cash-basis, revenue is only recorded when the cash is actually exchanged i.e. when revenue is received as cash and when expenses are actually paid.

·         Accrual-basis - By contrast, the accrual-basis records revenue at the moment that a legal obligation is created. (i.e. at the point when the goods are shipped or at the completion of a service for a customer regardless of when the cash is actually exchanged). Similarly, under the accrual accounting method, expenses are recorded the moment a business becomes legally obliged to pay the bill (i.e. at the point of goods receipt or at the completion of the service by a supplier).

Another key difference between the accrual accounting method and the cash accounting method is that the accrual accounting method properly applies the accounting concept of the 'matching principle' while the cash accounting method does not. 

I assume that all are finance professionals and know the difference between these two systems. My answer is yes of course the results will be entirely different. Nowadays most of the firms are following accrual basis rather than cash basis. The accuracy of financials will be in accrual system because it will show the liabilities or revenues for the same period it occurred rather than when it received or paid, you can buy anything but not necessary you pay same time, most of the companies are giving credit period 30, 60 or 90 days.

For difference Ms. Ghada is defined very well.

For Sure they will lead us for different results as they are in total have different concepts and transactions.

For example ;

The Nassau Corporation experienced the following activity last year;

Sales of One Car of $100`000  for a customer (not yet collected )

Cost of $80`000  Paid in full

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)

Thanks for inviting and i agree with Mr HASSAN AHMED answer.

Hello Team,

The results produced by the cash and accrual accounting methods will only be different if you do some transactions on credit. If all your transactions are paid in cash as soon as completed, including your sales and your purchases, then your ledgers will look the same, regardless of what method you use.

The main difference between accrual and cash basis accounting is the timing of when revenue and expenses are recognized. The cash method is most used by small businesses and for personal finances. The cash method accounts for revenue only when the money is received and for expenses only when the money is paid out.

Regards,

Saiyid

shahbaz haider answer is perfect.

If you considering cash basis and accrual in same case... profit will be different 

True and False..---------------...both are correct.

agree with ghada

thanks for the invitation

True and False.

As answered by others, if the transactions are only in cash then there is no difference between the two.