(Solution) BUS 1102 Written Assignment Unit 2: Cash or Accrual Basis Accounting

COURSE

BUS 1102 – Basic Accounting

For this Written Assignment, refer to Chapter 4 (Page 238) in the Franklin, Graybeal, & Cooper text: THINK IT THROUGH Cash or Accrual Basis Accounting? You are a new accountant at a salon. The salon had previously used cash basis accounting to prepare its financial records but now considers switching to an accrual basis method. You have been tasked by the owner with determining if this transition is appropriate. When you go through the records you notice that this transition will greatly impact how the salon reports revenues and expenses. The salon will now report some revenues and expenses before it receives or pays cash. You are tasked with creating a document for the owner that addresses the following:

  • How will change positively impact its business reporting?
  • How will change negatively impact its business reporting?
  • As the accountant, would you recommend the salon transition from a cash basis to an accrual basis? Please explain your answer, citing research information.

You will be assessed on:

  • Your explanation of how change will positively and negatively impact business reporting
  • Your recommendation on the salon’s transition (or not transitioning)
  • Your level of details two previous bullets and including research citations
  • Organization and style (including APA formatting)

Compose your paper using Microsoft Word or a compatible word processor (LibreOffice, Google Docs, etc.). Your paper must be 2 to 3 pages in length using 12 point, Times New Roman font, and include an introduction, body, and conclusion. You must also cite sources using APA format.

SOLUTION  

First, it’s important to define the differences between the two accounting methods. Thus, accounting based on coins acknowledges sales when cash is acquired and costs when cash is paid. Receivables and payables can only be anticipated using this method. The cash-based foundation uses single-entry accounting. Because it is simple to maintain, many small businesses use the coins-based accounting system (Franklin et al., 2020). There is no need to fine-tune receivables or payables since it is clear when a transaction occurs (the cash is in or out of the bank). The coins system is also useful for keeping tabs on the amount of cash on hand for the business at any moment; you can check your bank balance to get a clear picture of your resources. The firm only has to pay taxes on its earnings once the money is in the bank since transactions are only recorded once the cash is received or paid. …..please click the icon below to purchase the solution at $10