Memo To Management From Chief Financial Officer

MEMOTo: ManagementDate: March2, 2018From: Chief Financial OfficerSubject: Accounting Method to EmployThere are two company accounting methods employed in reporting financial statements; cash and accrual accounting method. The cash and accrual accounting methods primary difference is in the timing of when to recognize or record purchases and sales in books of accounts. Usually, revenues and expenditures in cash accounting are recognized only when money transfer is made. On the other hand, revenue and expenditures in accrual accounting are recognized when earned and when billed (but not paid) respectively.This infers that the cash accounting basis recognizes revenues and expenses when cash is received and paid respectively. This therefore, infers that the method pays no recognition to accounts payable or accounts receivable. However, revenues and expenditures under the accrual basis are recognized or recorded when earned, irrespective of the time or day that the money actually changes hands. It is the most preferred method of the two.BizCon offered a 180-day financing so as to attract new clients to its services, as a result creating a cash flow problem that resulted in delay in to settle employees’ salaries for an entire month. This was also driven by the fact that the suppliers insisted on