Accounting word of the week
This week we will be discussing two methods of accounting:
1. Cash method
2. Accrual method
The cash method is a method of recogonizing revenue and expenses when cash received or disbursed rather than when earned or incurred.
The accrual method is a method of recogonizing revenue when earned and when expenses incurred. They are recorded at the end of the accounting period even though cash not been received or when expenes have been paid. An example of accrual method is revenue on a contract that is over a certain amount of time. Another example is an insurance policy that is over a certain amount of time.