2. Describe the difference between cash basis accounting and accrual basis accounting? You pay an insurance...

2. Describe the difference between cash basis accounting and accrual basis accounting? You pay an insurance premium in December 2015 for $1,200. It covers the period of December 2015 through November 2016. How do you record the entry on each

Expert Solution

The Basic Difference between the both types of accounting is How Expenses and Revenues is Recorded and Recognized in the books. In the Cash Basis Accounting Expenses /Revenues in Recognized as soon as it is paid and in accrual basis it is recognized when it is incurred irrespective of whether it is paid or not

cash basis accounting

	Debit	Credit
Insurance Expense	$ 1,200.00
Cash		$ 1,200.00

accrual basis accounting

	Debit	Credit
Insurance Expense	$ 120.00
Prepaid Expense	$ 1,080.00
Cash		$ 1,200.00

ekkarill92 answered 2 years ago

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