a. Lisa's accrual accounting shows a higher net profit than
Laura's cash accounting method. With the difference being Lisa's $10,750 to
Laura's $8,050 profit.
b. Cash Accounting would show the most accurate amount of
money on hand over the accrual accounting method. "Alternatively, a
cash accounting system is a method that records revenue as being earned when it
is actually received."(Dopson 49).
c. Accrual accounting shows the revenues generated
regardless of when they were received, unlike cash accounting. "In an
accrual accounting system, revenue is recorded when it is earned, regardless of
when it is collected, and expenses are recorded when they are incurred,
regardless of when they are paid."(Dopson 49)
d. Accrual accounting shows the actual expenses regardless
of what has been paid, unlike how cash accounting only shows what has been paid
not the full amount.
e. Cash Accounting shows the inflows and outflows of cash as
a direct effect to the profit, where accrual accounting looks at the big
picture regardless of when transactions are completed. "The major
advantage to using a cash accounting system is its simplicity."(Dopson
49).
f. Accrual Accounting will show the most accurate reflection
of their restaurant's true profitability. As it may not account for what has
been directly paid or received like cash accounting, it gives the final numbers
rather than the progress.
Work Cited:
Dopson, Lea R. Managerial Accounting for the Hospitality Industry. Wiley, 09/2008. VitalSource Bookshelf Online.
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