Assessment 2 Slides
RMIT Classification: Trusted Question 1 Click icon to add SmartArt graphic
RMIT Classification: Trusted Accounting Methods Transactions are recorded(manually/electronically) according to the type of accounting system that a business uses. This system can be either cash- or accrual- based. These are also called as Accounting MethodsAssessment Task 2 Q1
RMIT Classification: Trusted 1. CASH ACCOUNTING METHOD Cash accounting is the methodology under which financial transactions are recorded when transactions actually happen (when actual cash is received or paid out). Suits smaller businesses/ Sole Traders For example, income will be recorded when the company receives cash and expenses are recorded when they are actually paid out and not when the bill is made. Assessment Task 2 Q1
RMIT Classification: Trusted Cash Accounting Examples 1.A small business might have made sales in 2022, but since the revenue was not received till 2023, the revenue from these sales might not be recorded until the payments are actually received in 2023. 2.a small business owner provides services to a client and receives cash payment immediately. In cash accounting, the business owner would record the income on the day they received the cash. 3. if the business owner purchases supplies and pays for them in cash, they would record the expense on the day the cash was paid. Assessment Task 2 Q1
RMIT Classification: Trusted ACCRUAL ACCOUNTING METHOD In this financial transactions are recorded when they occur, regardless of when the cash is received or paid. Income is recorded when it's earned, and expenses are recorded when they're incurred. Medium Sized and Large businesses prefer this method
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