What is the difference between mercantile system and cash system (in accounting)?
The mercantile system is better known in the US as the accrual system. The difference between the accrual and cash system is when a transaction is recognized: the cash system recognizes (records) the transaction when the money is paid or received, while the accrual system recognizes the transaction when it occurs, regardless of whether or not the money is received. For example, let’s take a company that sold computers to another company, with payment to be made in 30 days. Under the cash system, the revenue from this transaction is recorded in 30 days, while under the accrual system the revenue is recorded the day the computers were transferred to the other company.
