Question

1. What is accrual accounting basis? Support your answer with examples
2. What is cash basis accounting?     Support your answer with examples

Answer 1

Accrual basis of accounting:means that financial statements should reflect the time they actually occur rather than when cash is paid.

lets take an example this is best understood if you take an year end adjustment. lets take salary expense, say salary for the current month is paid on the 1st day of next month.

so Salary for the month of dec 2019 will be paid on 1st January 2020

so in accrual basis of accounting , entry of expense will be passed in the books of accountss and an expense wil be booked in the income statement.

in cash basis of accounting no entry will be passed in dec 2019 rather an entry will be passed in jan 2020,

a comparative table is shown below

Accrual Basis of accounting		Cash basis of accounting
Date	Accounts	Debit	Credit		Date	Accounts	Debit	Credit
31-12-2019	Salary expenses	2000			31-12-2019	No entry
	Salary expenses payable		2000
01-01-2020	Salary expenses payable	2000			01-01-2020	salary expense	2000
	Cash		2000			cash		2000

as we can see in accrual basis of accounting a provisioning is done for the expense incurred for the month and also to conform to the matching and timing principle

no such thing applies to cash basis of accounting

you can also think of your telephone expense, other contractual expenses, unearrned revenues and work out as above,

for any further clarifications please comment i will get back to you ASAP