How Do You Convert From Accrual To Cash Basis Accounting?
The two basic methods of accounting available to businesses are the accrual basis and the cash basis. The accrual basis of accounting records income when it is both earned and realized or realizable. To be earned, goods or services must have been provided. The realized or realizable concept deals with the collection, or foreseeable collection, of payment for the goods or services that were provided. Expenses are recorded when the related income is recorded under the accrual basis of accounting. The cash basis of accounting records income when it is collected and expenses when they are paid. Many businesses operate under the accrual basis but report their tax returns on the cash basis of accounting. Because of the recording differences, there is a reconciliation process that needs to occur to convert from the accrual basis to cash basis. Review your trial balance. If year-end adjustments are necessary, make the adjustments prior to converting from accrual to cash basis. Examine the acco
