Cash Basis vs Accrual Basis Accounting (Simple Differences)

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What is the difference between cash basis and accrual basis accounting? In this video, I show you in excel exactly the main differences between cash basis and accrual basis accounting. We use a real-world business and got through 3 transactions and show how to exactly the difference in recording them with cash vs. accrual basis accounting. Then we take a look at how these transactions impact the income statement. Check it out!

⏱️TIMESTAMPS

0:00 Intro
0:32 What is the Difference? - Cash vs. Accrual Basis
1:31 Transaction 1 - Cash Basis
3:13 Transaction 1 - Accrual Basis
5:02 Transaction 2 - Cash Basis
7:02 Transaction 2 - Accrual Basis
8:34 Transaction 3 - Cash Basis
10:27 Transaction 3 - Accrual Basis
12:55 Impact on Income Statement - Cash Basis
14:22 Impact on Income Statement - Accrual Basis
15:18 Summary and Outro

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⏱TIMESTAMPS

0:00 Intro
0:32 What is the Difference? - Cash vs. Accrual Basis
1:31 Transaction 1 - Cash Basis
3:13 Transaction 1 - Accrual Basis
5:02 Transaction 2 - Cash Basis
7:02 Transaction 2 - Accrual Basis
8:34 Transaction 3 - Cash Basis
10:27 Transaction 3 - Accrual Basis
12:55 Impact on Income Statement - Cash Basis
14:22 Impact on Income Statement - Accrual Basis
15:18 Summary and Outro

Accountinguniv

Hello, I am not an accountant, but I have been searching the internet trying to find a place I can ask accounting questions to help me with my bookkeeping. One of my questions about the cash method is this: With the cash basis method, am I correct that you record the date you received the check/cash and NOT the date you deposit it in the bank account? If so, is the rule of using the date received changed when you receive a check (tax deductible donation) after 12/31, but the envelope was post marked on or before 12/31? Is it that the donation is recorded in the ledger the day received (not the day post marked or deposited), but if the post mark is on or before 12/31 their donation counts for the previous year? But, it seems that will make the books messy. I hope I was able to write my question so that it is understandable. Thank you for your help.

TheDigglesFamily

I have heard a case where the client could not pay the service on time, sometimes the late payment turn into installment for 2-3 years (for whatever reason). If the service has been recorded as revenue, how do we adjust that especially for tax purposes?

panduwibowo

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