50 Enrolled
1 Hour (On-Demand)
CPE Not Available
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Within accounting and bookkeeping, two types of accounting methods are utilized to record transactions.  These methods are at the core of both the accounting and bookkeeping functions.  They include:

  • Cash Accounting – which recognizes revenue and expenses only when money changes hands.
  • Accrual Accounting – which recognizes revenue when it is earned and expenses when they are incurred or obligated (separate from the time at which they may be paid).

To ensure your entity is properly recording and tracking transactions, it is important to understand the basic variances between cash and accrual accounting and when they are best utilized. It's pretty much "all in" once you make this decision.

The cash approach may be preferred where all or most of the following conditions apply; the company uses single-entry accounting, has relatively few financial transactions per day, does not sell on credit (does not deliver goods or services and then invoice customers for payment later), at the time of sale customers must pay either by cash, written check, bank transfer, or 3rd-party credit/debit card, and, finally, has very few employees.

The accrual basis is used by all larger companies, for several reasons. Its use is required for tax reporting when sales exceed $5 million, for public companies that trade shares on stock exchanges which are required to follow GAAP which requires accrual-based accounting, and when investors want the most accurate picture possible of the state of a company's finances. A company's financial statements can only be audited if they have been prepared using the accrual basis. 

This course examines how each method impacts a business’ financial position and financial statements.  We utilize various scenarios and compare and contrast the two methods.

NOTE: This course is one of a series of courses developed for the Professional Bookkeeping Certification program on Illumeo. The full curriculum of courses will provide you with the ultimate foundation to a career as a bookkeeper. 

Learning Objectives

  • Explore the cash basis of accounting.
  • Explore the accrual basis of accounting.
  • Introduce the concept of reversing entries.
  • Explore the advantages and disadvantages of cash basis and accrual basis accounting.
  • Explore the analytics of accrual accounting.
  • Recognize how to compare and contrast the accounting methods through examples.
Last updated/reviewed: November 14, 2019

Included In Certifications

This course is included in the following Certification Programs:

14 CoursesProfessional Bookkeeping Certification

  1. Bookkeeping: Terminology and Process Execution
  2. Bookkeeping: Debits And Credits
  3. Bookkeeping: Cash vs. Accrual
  4. Bookkeeping: Payroll And Expenses
  5. Bookkeeping: Legal Entity And Chart Of Accounts
  6. Bookkeeping: Journals, Subsidiary Ledgers and General Ledger
  7. Bookkeeping: Responsibilities
  8. Bookkeeping: Fixed assets and inventory
  9. Bookkeeping: Accounts Payable/Accounts Receivable And Receipts
  10. Management Internal Control Essentials
  11. GAAP Principles, Assumptions and Considerations
  12. GAAP Presentation of Financial Statements
  13. Bookkeeping Basics – Case Study Scenario
  14. Useful Bookkeeping Tools

17 CoursesPROFESSIONAL BOOKKEEPING CERTIFICATION - THE VIRTUAL LIVE PROGRAM

  1. Bookkeeping: Terminology and Process Execution
  2. Bookkeeping: Legal Entity And Chart Of Accounts
  3. Bookkeeping: Responsibilities
  4. Management Internal Control Essentials
  5. GAAP Principles, Assumptions and Considerations
  6. Bookkeeping: Debits And Credits
  7. Bookkeeping: Cash vs. Accrual
  8. Bookkeeping: Payroll And Expenses
  9. Bookkeeping: Journals, Subsidiary Ledgers and General Ledger
  10. Bookkeeping: Fixed assets and inventory
  11. Bookkeeping: Accounts Payable/Accounts Receivable And Receipts
  12. GAAP Presentation of Financial Statements
  13. Bookkeeping Basics – Case Study Scenario
  14. Financial Statement Introduction
  15. Information Technology (IT) Risks in Emerging Business Environments
  16. Segregation of Duties for Core Business Processes
  17. Useful Bookkeeping Tools

10 Reviews (25 ratings)Reviews

5
Member's Profile
Lynn we are on a roll today. Thanks to your easy to listen to style, I can spend hours and hours in your training programs. You are the best. Thanks for all you do, Larry
5
Member's Profile
Understanding the Cash and accrual basis of accounting has provided a fundamental guide when dealing with Sales and Payable process.
4
Anonymous Author
I have only worked with accrual accounting so it was a good course to extend my knowledge with other accounting ways.
4
Anonymous Author
This course was informative and gave a good description of the difference of Accrual and Cash accounting
5
Member's Profile
This was good.I am getting a clearer picture of the which accounts to Debit and Credit, very helpful.
5
Member's Profile
I like seeing examples of different scenarios. I believe it helps to see how the flow goes.
4
Anonymous Author
Good overview of the different methods, and the advantages and disadvantages of each.
5
Member's Profile
Very informative... I have now a better understanding of the whole picture...
5
Member's Profile
Great explanation and examples. Clear presentation.
5
Anonymous Author
It was very comprehensible and easy to understand.

Prerequisites

Course Complexity: Foundational

No Advanced Preparation or Prerequisites are needed for this course. However, it is recommended to take the other courses in the series prior to completing this one.

Education Provider Information

Company:
Illumeo, Inc., 75 East Santa Clara St., Suite 1215, San Jose, CA 95113
Contact:
For more information regarding this course, including complaint and cancellation policies, please contact our offices at (408) 400- 3993 or send an e-mail to .
Course Syllabus
INTRODUCTION AND OVERVIEW
  3:33Introduction to Bookkeeping Basics– Accrual vs. Cash Accounting
  8:40Cash Basis
  12:06Accrual Accounting
  11:26Accural Accounting Continued
  3:26Advantages/ Disadvantages
  2:11Analyzing Accrual Accounting
  10:26Example
  00:39Summary
CONTINUOUS PLAY
  52:28Bookkeeping Basics– Accrual vs Cash Accounting
SUPPORTING MATERIALS
  PDFSlides: Bookkeeping Basics– Accrual vs. Cash Accounting
  PDFBookkeeping Basics– Accrual vs. Cash Accounting Glossary/Index
REVIEW AND TEST
  quizREVIEW QUESTIONS
 examFINAL EXAM