Accounting Method
There are two Accounting method used. These are
:
Small businesses normally run on a cash basis with large
corporation operating on an accrual basis.
Cash Accounting
The Cash Accounting
method – This is where the point of
receiving and payment of income expense are recognized at the point where cash is
transferred.
Accrual Accounting
Accrual Accounting Method- This is where the income and expense are recognized at point of sale, including
credit transaction. Revenue is recorded at the inflow of good and service sold, expenses are recorded as of
the outflow of cost for the expenses e g. purchase order being raised for the items.
In Accounting there are normally two ways to do
most things.
- the simple (basic) method
- the detailed accounting method
Single entry Accounting
Single Entry Accounting Method – is the uses of a column recording system for
recording transaction. Each cash transaction is recorded in payment or receipt column which are added up at
the end of the period to form an Income Statement (profit /loss). This method is used by small businesses
that have a small amount of expense.
Double Entry Accounting
Double Entry
Accounting Method -this is the use of an accounting package or T accounts so each time you record a
transaction two accounts are involved. One is debit and the other is credited. In an accounting package this
is done automatically when you entered. eg when money is used for the purchase of items the accounting
package will debit the items and credit the bank account.
These terminology are use
in all Accounting
Methods.
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