Choosing Accounting Methods for a Financial Advisory Firm

Week 2: Chapter Discussion (ACCT502 Students Only) Instructions Read the following article and respond to the question below:https://www.business.com/articles/which-is-better-cash-or-accrual- based-business-accounting/(Links to an external site.) If you started a business, what method of accounting (i.e. cash or accrual) would you use and why? Make sure to include the nature of the business you would start. If I were to start a business, I would open a financial advisory firm. This would focus on advising clients with their finances and how to effectively manage their money. It would also help them with building wealth and learning useful spending habits. With this type of business, I would initially want to use a cash-basis form of accounting as the business would start small and focus primarily on advising sessions as the primary service. This would help keep the accounting process simple during the early stages of the business as there is not much to account for (Peek, 2015). As clients would pay before each session, and there are no inventory or goods, we would only need to focus on the immediate transactions. However, if the business expanded and there was more to account for, like more services as well as extra bills, it would likely be necessary to use an accrual-basis form of accounting. This would be because a detailed and more complex form of accounting is required to keep track of everything, and a cash-basis form does not offer this (Peek, 2015). However, this would only be necessary if the business expands enough to the point where it would be difficult to track all the revenues and expenses. Otherwise, it would be best to keep it simple with a cash-basis form. References Peek, S. (2015).Is cash- or accrual-basis business accounting better?business.com.https://www.business.com/articles/which-is-better- cash-or-accrual-based-business-accounting/ Hi Brandon, I am impressed that you would choose a financial advisory firm. If I were great at interpreting financials, then I would also consider doing that. I would be your targeted consumer because I am not the best at effectively managing my money, and I can see how you would make this into