Write down any three differences between Cash Basis and Accrual B…

Question

Write down any three differences between Cash Basis and Accrual Basis of Accounting.

✓

Answer

S.n	Basis	Accrual Basis of Accounting	Cash Basis of Accounting
1.	Nature of Transactions	Both cash and credit transactions are recorded.	Cash transactions are recorded.
2.	Prepaid/ Outstanding Expenses Accrued Income/ Income Received in Advance	Accurued income and income recieved in advance are also accounted and shown in the Balance Sheet	Prepaid and outstanding expenses are no adjusted. Similarly, accrued income and income received in advance are not adjusted.
3.	Profit or Loss	Correct profit or loss is ascertained because it records both cash and credit transactions.	Correct profit or loss is not ascertained because it records only cash transactions.

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