Sayed Mahmood Alaali

Hello again,

It look like I want to share the basic with you as soon as I read it.

Today I was reading the book from the begining to refresh my information. It is a really good book and easy for one like me.

So today we will going to talk a little about the two methods in accounting.

what is the difference between the two methods?

Cash-Basis Accounting:

In this method it based on cash flow. So you report the income or expenses when you get the money. so when you do a service for your customer. you don’t have to write about it in the accounting documents until he pay the money. even if you received a service or products for the supplier you have to write it when you pay the money to the supplier .

Accrual Accounting: 

In this method it based on when the transaction happens, even if you don’t get the money from your customer. when you do the service for your customer you have to write it in the accounting documents. if you received a service or products for the supplier you have to write it when you receive this service or products.

In the few next days I will talk about how to chose your method. you can search about that in the internet and you will find that the major companies rely on the accrual method. you will know why in the next post.

See you soon