Accrual Method Checkpoint Hsm 260

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Accrual Method

HSM/ 260 -Financial Management for Human Services Managers
July 12, 2012

Accrual Method

The accrual method records the transaction even before the organization has received the money for the services. The accrual method works the best for nonprofits organizations then profit organizations. For example, if the organization supplying a service records the cost of the services, and does not wait until they receive the money for the services rendered. The accrual method shows an organizations debt and income more accurately then in cash basis accounting. In accrual method, revenue is not equal to cash, because a cash account has to have a receipt to match the amount of money recorded in the books as a transaction. In an accrual method, the revenue occurs when the money changes hands. Cash accounting has no record on file as payment until the customer pays for products or services rendered. This method of cash accounting shows more money went out in one month than has come in during that same month. Therefore, this will show more income in the next month and less product on hand for the same month that the organization provided the services. In a cash accounting method, the business may not know financially what it has until every transactions recorded. Cash accounts show part of the picture, which is cash in and cash out that has occurred within the organization. The cash flow statement shows every transaction that has occurred as it happens with in the organization. This statement shows the amount of cash coming in and the cash paid out to other services. This cash flow statement shows a breakdown of the organizations financial statement to show what has occurred in a certain amount of time. For example, you can see the income and expenses for either a month or a year. The cash flow statement generally assesses a business’s financial health. This statement can help investors if they are planning to invest in this business, and to...
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