Mathods of accounting

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Uma Shankar Gupta

Uma Shankar Gupta (Querist)
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20 September 2013 which is the type of method of accounting ?

Nikhil Kaushik

Nikhil Kaushik (Expert)
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22 September 2013 Accounting can be done on accrual basis or cash basis.

In accrual basis, accounting entries are passed on the basis of matching principle ie. income and expense are booked on the basis of which period do they relate too.

for eg, if I make advance payment for purchase of goods, in accrual basis, I would book it as advance paid. As and when goods are actually purchased, the advance paid shall be adjusted against good purchased.

In cash accounting, matching principle is not followed. As and when actual cash payment is made or cash is received, income and expense are booked respectively.

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