Accounting Instruction, Help, & How To (Financial & Managerial)

Cash method & accrual method explained, the most common accounting methods, cash method recognizing revenue when cash is received and expenses when cash is paid, accrual method recognizing revenue when cash is earned and expenses are consumed or used to help generate revenue. Accrual method tries to find the specific point in time when revenue was earned, while the cash method uses the receipt of cash as being close enough the point in time that revenue was earned. Recognizing revenue when earned is the accrual concept of revenue recognition. We will have another video on the accrual concept of revenue recognition. The accrual method attempts to pinpoint the point in time that expenses are incurred or used while the cash method uses the spending of cash to be close enough. The accrual concept of recognizing expenses when earned is called the matching principle. We will have another video on the accrual concept of the matching principle.