Nonprofit organizations are required to produce financial statements based on the
accrual method of accounting. How is this different from the cash basis of accounting?
With accrual accounting it is easy to recognize when revenues are earned and expenses
are incurred. Under the cash accounting method an non profit agency would not have
any revenues because everything is recorded on a cash in and cash out transactions under
cash accounting. There is never any way to know what expenses may be occurred with
money accounts method.
Why is accrual accounting important? Accrual accounting is important because it gives a
exact portrait of what the agency or business economic circumstances, the organization
proceeds is recorded on the manuscripts when it is actually produced at any rate of when
it is established and the remaining revenues for each era. In other words it shows a
obvious representation of an organization economic standing for a financial era.
In accrual system, does revenue equal cash? No it never does equal cash because cash
financial records depend on the proof of payments of income such as deposits or checks
and expense from consumers. Depending on the period in which money is earned is how
revenue is based.
What is the importance of the statement of cash flow in the financial management of
an organization? It’s important because it give detail changes in money and provides
information associated to the company working, endowing and financing activities in a
way to transport advantage to diminutive breakdown and money arrangement of the
company. Money activities are broken down into three major categories of cash in
and out flows.
For example: one would have operating, investing, and financial activities. Under
Operating activities contain currency consequences of contracts by remaining earnings or loss is
resoluted. Investing activities...