Accounting Essay Example | Topics and Well Written Essays - 250 words - 2

Accounting - Es recite ExampleCash flow statement is brisk separately to account for all the change transactions and determine the hard cash position of the p arentage apart from its profitability and sales figures, etc.If accounting was only based on cash, no reference work transactions could have been made in fact we would have been violating the principle of Going Concern. When we say tunees are a going concern, we usually pass entries to close accounts for an accounting period by transferring the balances to the beside accounting cycle. This is done because business transaction keep on taking place as business activities and trading operations are executed.The key accounting concept for using the accruals versus cash is that the profits & losses are not actually documented by a business at the same time when the cash transaction is made. In fact the two transactions are totally separate from each early(a) and have different accounting treatments. Profits and losses of any business are the outcome of its operations and revenue generating activities which circulate around the income and expense heads of accounting for that business. This involves expectation of cash inflows and outflows at a ulterior date as well as deferred cash transaction or prepayments, etc. that needs occlusion in a later period. Income and expense determine the cash that you might have eared or lost at the end of the day, when all the corresponding cash transaction have been made merely they strictly do not mean that cash has changed hands. We record the income and expenses in the period they are incurred in order to complying with accounting standards (Weygandt, Kieso, & Kimmel,