Hi Maf, Just a slight clarification on what accrual accounting means.
The GAAP contains certain principles about when income is considered to be earned and when expenses are considered to be incurred and when they are to be recognized/recorded in the accounts. These are not necessarily coincident in time with the receipt of payments for income or the payment by you for an expenditure for reasons which may be unrelated to you offering or accepting payment under terms of credit. In accrual accounting income is for example considered to be earned at the time when you perform the work that entitles you to receive that income even though you may not actually receive the payment until some time later (for example after submitting a report). Similarly you may incur an expenditure in accrual accounting terms at the time you enter into an agreement to purchase something, not necessarily when you actually make the payment. This can of course complicate the accounting and can be important in the tax accounting for many business. This is what defines accrual accounting. Most tax jurisdictions allow use of a simplified form of accounting (usually under a specified turnover threshold and under other specified conditions) where you record in your accounts income at the time you receive the payment and expenditure at the time you make the payment. This is usually referred to as accounting on a cash basis or Cash Accounting. The difference is in the timing of the recording of an event, e.g. the issuing of an invoice, and is not necessarily related to the use of A/R or A/P per se. These (A/R, A/P) relate specifically to a business providing credit to its customers under certain terms it specifies or accepting credit from its suppliers under the terms they specify and they can be used both with Accrual or Cash accounting. David ----- David Cousens -- Sent from: http://gnucash.1415818.n4.nabble.com/GnuCash-User-f1415819.html _______________________________________________ gnucash-user mailing list gnucash-user@gnucash.org https://lists.gnucash.org/mailman/listinfo/gnucash-user ----- Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All.
