This document summarizes a webinar presented by Adult Learning Australia on cash and accrual accounting. It introduces cash and accrual accounting methods, explaining that cash accounting records transactions when money is received or spent, while accrual accounting allocates revenue and expenses to the appropriate time period based on when the transaction occurred. Examples are provided to illustrate the difference, showing how accounting periods are reported under each method. The webinar aims to explain the differences and how accrual accounting provides a more accurate picture of a company's financial situation.
Morri Young: "Cash or accrual? Setting up an accounting system that works for you".
1. Cash and Accrual Accounting
Webinar
Adult Learning Australia
May 25, 2012
Adult Learning Australia Webinar: Cash and Accrual Accounting 25 June 2012
2. Housekeeping
• Introductions
• Room etiquette
• Scope of the session
Adult Learning Australia Webinar: Cash and Accrual Accounting 25 June 2012
3. Matrix on Board
o Three MDs from the NFP sector
o Established in 1997
o Building capacity in NFPs and Social Enterprises
o Our services
• Management support
• Financial management
• Education and training
www.mob.com.au
Adult Learning Australia Webinar: Cash and Accrual Accounting 25 June 2012
4. Matrix on Board
Adult Learning Australia Webinar: Cash and Accrual Accounting 25 June 2012
5. Matrix on Board
Adult Learning Australia Webinar: Cash and Accrual Accounting 25 June 2012
6. Matrix on Board
Adult Learning Australia Webinar: Cash and Accrual Accounting 25 June 2012
7. Accounting
The Science and the Art of Accounting
Adult Learning Australia Webinar: Cash and Accrual Accounting 25 June 2012
8. Accounting
The Science is recording what we earn,
and spend, and own and owe.
Adult Learning Australia Webinar: Cash and Accrual Accounting 25 June 2012
9. Accounting
The Art is putting a value on what we
earn, and spend, and own and owe.
Adult Learning Australia Webinar: Cash and Accrual Accounting 25 June 2012
10. Accountants are not Gods
These “rules” are individual and unique.
Adult Learning Australia Webinar: Cash and Accrual Accounting 25 June 2012
11. Accountants are not Gods
These “rules” are individual and unique. These “rules” are arbitrary and agreed.
Adult Learning Australia Webinar: Cash and Accrual Accounting 25 June 2012
12. The father of Accounting
Fra Luca de Pacioli
Adult Learning Australia Webinar: Cash and Accrual Accounting 25 June 2012
13. Double Entry Bookkeeping
Donation
Donations Cash at
Received Bank
Income Asset
Account Account
Adult Learning Australia Webinar: Cash and Accrual Accounting 25 June 2012
14. Accounting Methods
CASH ACCRUAL
Adult Learning Australia Webinar: Cash and Accrual Accounting 25 June 2012
15. Accounting Methods
CASH
Accounting for what we earn and
spend when we earn and spend
it.
Simple to process. [“Spend
money” “Receive Money” buttons
on MYOB]
Enters transactions at the date
payment is made or received.
Reflects cashflow.
But not a „real‟ financial picture.
Adult Learning Australia Webinar: Cash and Accrual Accounting 25 June 2012
16. Accounting Methods
ACCRUAL
Accounting for the value of
„obligations and commitments‟ we
make to others and they make to us
More complicated to process.
[“Purchases” “Sales” buttons]
Enters transactions at the date
commitment is made or received.
Reflects a combination of owing
and owning, earning and spending.
A more „real‟ financial picture.
Adult Learning Australia Webinar: Cash and Accrual Accounting 25 June 2012
17. Accounting Methods
ACCRUAL MANTRA
“Allocate the
Right Amount in the
Right Account for the
Right Period”
Adult Learning Australia Webinar: Cash and Accrual Accounting 25 June 2012
18. Example
The Coveted Bookshelf
Its March 21 and its your birthday!
Fortunately you were paid today in cash, and you have a fortnight’s pay of
$1000 in your purse. On the way home, you see that nice little bookshelf, the
one you have admired for months. You know that the monthly household
rent of $1000 is due in two weeks (April 1), there is food in the fridge, and
there are no bills on the kitchen bench. Your regular birthday money from
Grandma hasn’t arrived, but it is due any day and she has sent you $250 each
year for the past 10 years! You see that the bookshelf has been reduced to
$400…. You are very tempted, (little knowing that there is a $300 telephone
bill for the month in the mail heading towards you!) The bookshelf is a
bargain! Should you buy it?
Adult Learning Australia Webinar: Cash and Accrual Accounting 25 June 2012
19. The Coveted Bookshelf
My Income Statement
CASH ACCOUNTING
for the Fortnight ended 31 March 20XX
Income
Wages
Birthday Money
Total Income
Expenditure
Bookshelf
Delivery
Rent
Food
Phone Bill
Total Expenditure
Surplus/Deficit
Adult Learning Australia Webinar: Cash and Accrual Accounting 25 June 2012
20. The Coveted Bookshelf
ACCRUAL ACCOUNTING
My Income Statement
for the Fortnight ended 31 March 20XX
Income
Wages
Birthday Money
Total Income
Expenditure
Bookshelf
Delivery
Rent
Food
Phone Bill
Total Expenditure
Surplus/Deficit
Adult Learning Australia Webinar: Cash and Accrual Accounting 25 June 2012
21. Example
The month of October
Adult Learning Australia Webinar: Cash and Accrual Accounting 25 June 2012
22. Way Forward Inc
Income Statement
CASH ACCOUNTING
for the Month ended 31 October 20XX
Income
Grant Received
Total Income
Expenditure
Electricity
Phone
Photocopy Lease
Total Expenditure
Surplus/Deficit
Adult Learning Australia Webinar: Cash and Accrual Accounting 25 June 2012
23. Way Forward Inc
ACCRUAL ACCOUNTING
Income Statement
for the Month ended 31 October 20XX
Income
Grant Received
Total Income
Expenditure
Electricity
Phone
Photocopy Lease
Total Expenditure
Surplus/Deficit
Adult Learning Australia Webinar: Cash and Accrual Accounting 25 June 2012
24. Thank you…
From Adult Learning Australia
And Morri Young from Matrix on Board
Adult Learning Australia Webinar: Cash and Accrual Accounting 25 June 2012
Editor's Notes
Wrote books on mathematics, chess, magic..Franciscan monk, born in 1447 and moved to Venice in 1464Eventually worked with Leonardo da Vinci. Published a textbook in Venice 1494, for use in the schools of Northern Italy. It was a synthesis of the mathematical knowledge of his time It is also notable for including the first published description of the method of bookkeeping that Venetian merchants used during the Italian Renaissance, known as the double-entry accounting system.The system he published included most of the accounting cycle as we know it today. He described the use of journals and ledgers, and warned that a person should not go to sleep at night until the debits equalled the credits. His ledger had accounts for assets (including receivables and inventories), liabilities, capital, income, and expenses — the account categories that are reported on an organization's balance sheet and income statement, respectively. He demonstrated year-end closing entries and proposed that a trial balance be used to prove a balanced ledger. Also, his treatise touches on a wide range of related topics from accounting ethics to cost accounting.For a wonderful read, check out “Double Entry” by Jane Gleeson-White.Rollicking…
Even in the simplest methods, we use DE bookkeeping.Our organisation gets a donation, we show it as income in the profit and loss accounts as Donations.And the other side of the entry is that it appears in an Asset Account in our Balance Sheet as Cash in the Bank.One side is something we earn, and it is now matched with something we own, cash at bank…Sometimes we can just change one thing to another.. Eg cash at bank becomes a computer.. One asset to another.