Cash accounting

1. Cash Accounting
Presented by: Robbia Gulnar

2. Learning Goals
 Describe the basic elements of a financial accounting system.
 Describe the cash and accrual bases of accounting
 Use the cash basis of accounting to analyze, record, and
summarize transactions for corporation’s first period of
operations.
 Use the cash basis of accounting to prepare financial statements
for the first period of operations.
 Describe the advantages and disadvantages of the cash basis of
accounting

3. Balance Sheet
Assets = Liabilities
Stock-
holders’
Equity
+
The rights of creditors The rights of the
stockholders
The
Accounting
Equation

4. Describe the cash
and accrual bases of
accounting.
2
Learning Goal

5. Under the cash basis of
accounting, a business
records only transactions
involving increases or
decreases in cash.

6. Under the accrual basis of
accounting, revenue is
recorded as it is earned and an
expense is recorded when
incurred.

7. Use the cash basis of
accounting to analyze,
record, and summarize
transactions for a
corporation’s first period
of operations.
3
Learning Goal

8. Dr. Landry deposits $6,000 in a bank
account in the name of Family Health
Care, P.C. in return for shares of stock
in the corporation.
Capital
Stock
6,000 Investment by
Dr. Landry
Cash
6,000
a.
Assets Stockholders’ Equity
=

9. STOCKHOLDERS’ EQUITY
Capital Stock Retained Earnings
Stockholders’
Investments
Revenues Expenses Dividends

10. Describe the advantages and
disadvantages of the cash
basis of accounting.
Learning Goal

11. The primary advantage of
the cash basis of accounting
is its simplicity.

12. The primary disadvantage of the
cash basis is that revenues and
expenses may not be properly
matched on the income
statement.