SMALL AND MEDIUM-SIZED ENTITIES BETWEEN THE ACCRUAL BASIS OF ACCOUNTING AND CASH ACCOUNTING

Mihai Ristea (), Alexandra Doroş (), Corina Ioanăş () and Dan Dragos Morega
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Mihai Ristea: Academy of Economic Studies Bucharest
Alexandra Doroş: Academy of Economic Studies Bucharest
Corina Ioanăş: Academy of Economic Studies Bucharest
Dan Dragos Morega: PhD Student at the Romanian Academy in Bucharest

Romanian Economic Business Review, 2010, vol. 5, issue 4, 208-220

Abstract: Should revenue be recognized when generated or when ultimately collected by a company? Should expenses be recognized when incurred or when finally paid? The answers to these questions vary and are dependent or whether a entities employs the cash or accrual basis of accounting. The cash basis of accounting focuses on the cash flows connected with revenue and expenses. But the cash basis of accounting is criticized as not being in accord with economic reality. The accrual basis of accounting overcomes the chief limitation of the cash basis – a possible mismatch of revenue and expenses.

Keywords: Cash accounting; accrual bassis of accounting; IFRS Project; financial statements; cash-flow (search for similar items in EconPapers)
Date: 2010
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