Abstract
A letter to a senator regarding why the federal government should use the accrual method of accounting.

From the Paper
"Dear Senator, Public corporations are required to use the accrual method of accounting in order to provide shareholders and other interested parties with the data they need to make informed decisions. Yet, the federal government itself uses the cash basis of accounting for its budget system which provides not much more information than a checkbook. Under the cash system of accounting, expenses are recorded when they are paid and revenue when it is received. Under the accrual system, liabilities..."

Tags:cash accounting, accrual accounting

Abstract
A brief review of the differences between cash-basis financial accounting and accrual-basis financial accounting. Differences between accountants and financial managers regarding treatment of cash are also discussed.

From the Paper
"This paper compares and contrasts cash-basis financial accounting and accrual-basis accounting. Additionally, differences between accountants and financial managers with respect to the treatment of cash are considered.
"The conceptual difference between cash-basis financial accounting and accrual-basis financial accounting centers on the recognition of income and expenses. Within this context, a differentiation is made in accrual-basis financial accounting between a) income and expenses and b) receipts and disbursements."

Tags:Cash-basis, financial manager, accountant, Accrual-basis

Abstract
This paper focuses on the use of accounting on an accrual basis. The paper explains that the National Research Council (NRC) uses the accrual basis for accounting since under accrual accounting, the company record revenues when they are earned, and records expenses in the accounting period which they are incurred. Also, income is reported in the time period it was earned, irrespective of the when the revenue was received by the NRC.

From the Paper
"The National Research Council (NRC) uses the accrual basis for accounting since under accrual accounting, the company record revenues when they are earned, and records expenses in the accounting period which they are incurred. Also, income is reported in the time period it was earned, irrespective of the when the revenue was received by the NRC. The major benefits from this practice stem from the fact that:- * The accrual basis complies with GAAP procedures. * Accrual basis provides a more adequate picture of profitability, which may help with long-term planning and forecasting."

Tags:receivable, CAAP, profitability, implementation

Abstract
This paper explains that, in cash basis or cash accounting, businesses record transactions only if they involve the payment or receipt of cash, which does a poor job of matching revenues earned with money laid out for expenses. The author points out that, in accrual accounting, the economic impact of a transaction is recorded whether or not the transaction involves cash, which does a better job of matching revenues with expenses and of handling items such as property and equipment. The paper relates that the four statements used in the accrual method accounting are the balance sheet, the income statement, the statement of cash flows and the statement of stockholders' equity.

From the Paper
"An example would be a purchase of supplies in July but the supplies are not sold until August. You receive the cash in August. However, when the books are closed all you have to show for July is an expense for supplies but no revenue to offset it, meaning there is a loss for that month. This can make it difficult for a business to determine whether or not it is earning a profit because all its business activity does not always fall on the same month. It also has trouble tracking anything other than cash. For example if you purchased equipment or property the cash method of accounting would show the purchase and disbursement in the month of purchase. These items, however, will be used over a period of time."

Tags:transaction, impact, revenue, statement, equity

Abstract
The paper discusses the two generally permissible methods of keeping track of business income and expenses; the cash flow accounting method and the accrual accounting method. The paper points out that the International Accounting Standards Board (IASB) mandates cash flow methods, however, cash flow accounting is not without its critics. The paper asserts that certain industries may be better suited to one method depending upon the nature of financing or seasonal changes in demand, and while cash flow accounting may be less apt to be influenced by creative accounting techniques, neither method is immune.

From the Paper
"The accrual method is deemed easier for businesses, as with some transactions, it can be difficult to determine when the actual exchange of funds occurs, particularly if the actual monetary transaction involves a complicated exchange ("Cash versus accrual accounting," INC, 2000). But for most organizations, the main significance of the mandated or chosen use of one method over another is for tax purposes. Expenses incurred during one tax year cannot be deducted until they are paid using the cash method, but in the accrual method once the transaction occurs, it is recorded as a deduction for that year's tax statement: "You don't have to wait until you see the money or until you actually pay money out of your checking account," to take the deduction in the accrual method, so an organization does not have to wait until it is actually cash-poorer to record a potentially deductible expense ("Cash versus accrual accounting," INC, 2000).
"The advantage of the cash method is that it gives a truer idea of how much actual cash a business has on hand. Furthermore, it lessens the ambiguity as to whether the actual payment will be made to the business--only when the cash enters or leaves the account can the expense be recorded. What if someone does not pay for the item, for example, even though the actual transaction is recorded, as in the accrual method? This ambiguity is done away with in the cash method, as well lessens the risks of other methods of creative accounting, such as creating fictional future profits or expenses."

Tags:expenses, payments, tax, transactions

Abstract
This paper presents the basic forms and methods of accounting for cash accounting and accrual-based accounting and compares the two. It examines which form of accounting is more beneficial to specific sectors of the economy and looks at the advantages and disadvantages of each.

From the Paper
"In the cash basis of accounting, the business records are "cash in" (deposits to the bank account) called cash receipts, and "cash out" (checks) called cash disbursements. Cash receipts - Cash disbursement = Cash flow. Each month's cash flow is added to the preceding month's cash balance yielding the current month's cash balance.
The cash basis of accounting is more likely to be used by service businesses than by retail or manufacturing businesses. Service businesses usually do not need equipment and can sell a service they perform with nothing more than their own hands and minds. Think of people who are lawyers, writers, public relations and advertising personnel, and accountants."

Tags:business, banking

Abstract
This paper analyzes the theoretical and methodological strengths and weaknesses of the research paper, "The Market Pricing Of Accruals Quality" by Jennifer Francis, Ryan LaFond, Per Olsson, Katherine Schipper. The paper summarizes the strengths of the research and underlines the weaknesses of the empirical method. Finally, this paper discusses the limitations of the theoretical approach.

Table of Contents:
Synthesis Of Strengths
Accruals Quality Has An Impact On The Information Risk And The Cost Of Capital
Innate Accruals Quality Has A Larger Impact Than Discretionary Accruals Quality Has
Methodological Weaknesses
The Specific Sample Cannot Be Applied Generally
Hypotheses And Methods Are Questionable
There Are Variances Between Empirical Findings And Other Results
Theoretical Limitations
Only The Systematic Component Of Earning Quality Risk Contributes To The Equity Risk Premium
The Relation Between Accruals Quality And Cost Of Capital Depends On The Fundamental Risk
Accruals Quality Is Neither A Priced Risk Factor Nor A Determinant Of The Cost Of Capital

From the Paper
"In the paper Earnings quality and the equity risk premium: a benchmark model, Yee makes a distinction between the fundamental earnings and the reported earnings: the fundamental earnings are the accounting profits generating future dividend cash flows, while the reported earnings are the imperfect signal of fundamental earnings. He also makes the difference between the two sources of associated earnings risk: the fundamental risk and the earnings quality risk. The fundamental risk is the uncertainty of future dividends payments, whereas the earnings quality risk or information risk is the uncertainty that the reported earnings may not be announced quickly and precisely. Only the systematic components of earnings risk contribute to the equity risk premium, while all the components, either systematic or diversifiable, affect the earnings capitalization factors."

Tags:discretionary, capital, debt, equity

Abstract
This paper describes deferrals as prepaid expenses and accruals as accrued liability. It explains what these terms mean and how they are found on balance sheets. The paper gives examples of the terms that are described above.

Table of Contents:
Deferrals: Prepaid Expenses
1. Prepaid Expenses Recorded Initially as Assets
2. Prepaid Expenses Recorded Initially as Expenses
Deferrals: Unearned Revenues
1. Unearned Revenue Recorded Initially as Liabilities
2. Unearned Revenues Recorded Initially as Revenues
Accrued Liabilities
Accrued Assets

From the Paper
"Tracy (1997) stated that accrued liabilities is a short-term liabilities that arise from the gradual buildup of unpaid expenses, such as vacation pay earned by employees or profit-based bonus plans that are not paid until the following year. Example of an accrued liability is the salary of the employees. The amounts of such accrued but unpaid terms at the end of the fiscal period are both an expense and a liability (Fess and Niswonger, 1986)."

Tags:assets, liabilities, expenses

Abstract
This paper discusses the two large categories of accounting methods that companies tend to use, cash and accrual. The paper presents a definition of both concepts, as well as a comparison between the two methods. The paper offers general recommendations about when it is advisable to use one or the other. The paper contends that, nowadays, most companies use the accrual method.

From the Paper
"The accrual methodology, on the other hand, "records income when the sale occurs, whether it be the delivery of a product or the rendering of a service on your part, regardless of when you get paid" . The expenses are similarly recorded when the liability is contracted. For example, in December, we buy equipment worth $20,000, payable over a period of six months. With the accrual accounting method, the respective expense is recorded in the month it was produced and not in every six months to follow during which the payments are made. One of the problems that may arrive when using the accrual method refers to the fact that sometimes the exact moment when the transaction or the liability was contracted is not known."

Tags:income, expenses, sales

Abstract
This paper defines and compares two concepts in accounting - the cash basis and the accrual basis. It shows that the cash basis of accounting is more likely to be used by service businesses than by retail or manufacturing businesses. The paper also provides an example in table form to show the differences between the two systems.

From the Paper
"In short, under the cash method, a business reports income when it is received and reports expenses when cash is disbursed. Under the accrual method, a business reports income when the business has the right to receive the income and reports expenses when all events, which create the liability, have occurred and the amount of the expense is reasonably determinable."

Tags:disbursement, equity