Acc 561 Week 3 Assignment Accounting Methods

Under cash basis of accounting which BizCon is using revenuers are reported in the income statement when cash is received from customers and expenses are recognized when cash is paid out. This is in contrast to the accrual basis of accounting in which revenue is reported in the income statement when it is earned and expenses are reported and matched to the period to which they relate. Therefore due to 180 day financing offered by BizCon customers do not pay for six months. The import of this under cash basis of accounting is that sales relating to the months of July through to December are not recognized as revenue in the income statement. In the case where accrual accounting is used the sales for the period July through to December would be recognized in the income statement although the money is still outstanding. BizCons equipment supply termsmeanthat under cash basis of accounting the expense relating to equipment supplies is recognized as the money is paid out. This does not take into account that the equipment supplies may be used across several financial periods. Equipment acquired on the last hour of the last financial period will be an expense of that