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Essay / Research Paper Abstract
This 4 page paper explains what is meant by accrual accounting, the advantages and advantages of this method that is in line with the marching concept and the divergence and when it should be sued. The paper also gives an example of accrual accounting comparing it to the use of the prudence concept and shows the impact of the different methods on the net revenue and tax. The bibliography cites 2 sources.
Page Count:
4 pages (~225 words per page)
File: TS14_TEaccrual.rtf
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Unformatted sample text from the term paper:
which they occur not the period in which they are paid or received. The idea is that income is matched against the relevant expenditure against so that we see costs
and benefited marched to each other. This means that income is recorded when it is made, not when the cash is actually received. In that way there is not a
lag in the accounts. However, where there is a cost that is not going to match up with a revenue then it should be included in the accounts immediately.
There are a range of benefits that can be seen as realised where the use of accruals is seen, this allows us to
understand where it may be best ultised. With accrual accounting there is a better ability to make comparison between different periods and years and the costs and expenses are matched
up, this also means that the system is one that is a better at measuring costs and income. In traditional accounting the
focus is on the costs and inputs, accruals accounting shifts the focus to the outputs which can also be more useful for management as well as stakeholders. It may also
be argued where there are fixed assets accruals accounting will result in a more effective use of company resources, as seen with the charges made for fixed assets (ACCA, 2005).
Internally there is a greater facility to compare the internal provision of a service with an external or outsourced service; it may also aid with better financial management policies due
to the increased attention on the outputs and cash flow. On a larger scale the use of accruals helps to make accounts of different companies more comparable in an environment
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