Discussion 1, Debits and Credits, Discussion 2 , Accural-based Essay

Discussion 1, Debits and Credits, Discussion 2 , Accural-based Financial Statemets - Essay Example DQ2 The main difference between a cash based accounting system and accrued based accounting system is that the cash based system recognizes income when cash is received, while an accrued based system recognizes income when goods and services are shipped or when services are rendered. In an accrued based the income that is not collected at the point of sale becomes an account receivable. I would recommend the use of a cash based system for small businesses such as a hot dog vendor. The hot dog vendor is dependent on his weekly income to keep the business going. Big corporations are better suited for the use of accrued based accounting. In the service industry it is not uncommon to invoice bills payable net 30 or net 60. The account receivable and account payable ledgers are very important for companies and they can only be created through the use of accrued based accounting.