Cash vs Accrual Based Accounting for Government Contractors

Cash basis accounting is easily understood and usually adopted by most start-up companies. Cash basis reports only consider the flow of cash in or out of the business without regard for the often complicated rules of accrual basis accounting. Accrual basis accounting requires matching of revenue and expenses and recognition of revenue when earned and expenses when incurred - all regardless of when the cash was received or spent. Accrual basis accounting provides a more accurate picture of the business and is a requirement for government contractors to achieve an adequate accounting system.

Learning Objectives

1. Describe cash versus accrual based accounting
2. Define the matching principle
3. Explain the concepts of revenue recognition
4. Describe the impact of accrual accounting on filing taxes

CPE

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