Updated July 24, 2015
Cost accounting basics Chicago Illinois
Define accrual accounting:
If you are an experienced business owner and don’t know the answer to this question, then you need to call our offices today. Speaking in great generalities, accrual accounting seeks to bring all of the proper accounting transactions into the proper accounting period of time.
Let’s use an example.
You send someone a bill for work that you completed in January. Payment is received and deposited in March. From the standpoint of accounting, when is that transaction considered income? Is it in January when you did the work, or in March when you received the payment?
The answer to this question could have far reaching consequences if we were talking about something happening around your year end. Your income, and therefore, your income tax could either go up or go down, depending on the answers.
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Chris Amundson is the President of Accounting Solutions Ltd., a full service public accounting firm of Certified Public Accountants and Enrolled Agents handling the bookkeeping, accounting, tax preparation, and audit representation needs of Businesses, Estates, Trusts, and Upper Income Individuals.