When can we use cash basis accounting?

Question

0

Guest60 0 Comments

Is cash basis allowed for accounting purposes and when can a company use the cash basis accounting?

1 Answer

score 0 · Answer 1 · 2013-05-07T23:13:05+00:00

Cash basis accounting can not be used for financial reporting purposes. You can use cash basis accounting for managerial purposes (internal use) or if the bank asks you to prepare your account on a cash basis to get a loan but these accounts are only for specific purposes. Both GAAP and IFRS only allow accrual basis accounting.

Cash Basis accounting is generally used for internal purposes only. It’s still quite useful but the financial statements need to be prepared on an accruals basis.