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In accounting, a basis of accounting is a method used to define, recognise, and report financial transactions. [1] The two primary bases of accounting are the cash basis of accounting, or cash accounting, method and the accrual accounting method. A third method, the modified cash basis, combines elements of both accrual and cash accounting.
The cash method of accounting, also known as cash-basis accounting, cash receipts and disbursements method of accounting or cash accounting (the EU VAT directive vocabulary Article 226) records revenue when cash is received, and expenses when they are paid in cash. [1] As a basis of accounting, this is in contrast to the alternative accrual ...
Generally Accepted Accounting Principles (GAAP) [a] is the accounting standard adopted by the U.S. Securities and Exchange Commission (SEC), [1] and is the default accounting standard used by companies based in the United States.
This guide prescribes the modified cash basis of accounting to be used by all departments. Public entities and trading entities use Generally Recognized Accounting Practice (GRAP), developed by the South African Accounting Standards Board based on IPSAS. Public/ widely held companies use IFRS.
Income-tax-basis financial statements. Cash-basis and modified-cash-basis financial statements. Financial statements prepared using definitive criteria having substantial support in accounting literature that the preparer applies to all material items appearing in the statements (such as the price level basis of accounting).
Revenues may actually be received during a later period, while expenses may be paid during an earlier or later period. (Cash basis accounting, used by some small businesses, recognizes revenue when received and expenses when paid.) Governmental funds, which are not concerned about profitability, usually rely on a modified accrual basis. This ...
Operating cash flows: the principal revenue-producing activities of the entity and are generally calculated by applying the indirect method, whereby profit or loss is adjusted for the effects of transaction of a non-cash nature, any deferrals or accruals of past or future cash receipts or payments, and items of income or expense associated with ...
The definition under US GAAP (Generally Accepted Accounting Principles used in the United States of America): "An asset is a present right of an entity to an economic benefit." [ 7 ] Characteristics