Accounting Advisory

What Is an Accounting Advisory?

An accounting Advisory refers to the rules a company follows in reporting revenues and expenses. The two primary methods of accounting are accrual accounting (generally used by companies) and cash accounting (generally used by individuals).

Cash accounting reports revenues and expenses as they are received and paid through cash inflows and outflows; accrual accounting reports them as they are earned and incurred through sales and purchases on credit and by using accounts receivable & accounts payable. Generally accepted accounting principles (GAAP) requires accrual accounting.

Points to consider

An Accounting Advisory consists of the rules and procedures a company follows in reporting its revenues and expenses.

The two main Accounting Advisory are cash accounting and accrual accounting.

Cash accounting records revenues and expenses when they are received and paid.

Accrual accounting records revenues and expenses when they occur. Generally accepted accounting principles (GAAP) require accrual accounting.

Once a company chooses an accounting method, it has to stick to that method per rules and requires approval if it wants to change its accounting method.

We can help you understand Accounting Advisory and assist you in applying the suitable method for your company according to your needs and activity, and setting a range of administrative procedures to make sure your business runs smoothly and accurately.

Types of Accounting Advisory

Cash Accounting

Cash accounting is an accounting method that is relatively simple and is commonly used by small businesses. In cash accounting, transactions are only recorded when cash is spent or received.

In cash accounting, a sale is recorded when the payment is received and an expense is recorded only when a bill is paid. The cash accounting method is, of course, the method most people use in managing their personal finances and it is appropriate for businesses up to a certain size.

Accrual Accounting

Accrual accounting is based on the matching principle, which is intended to match the timing of revenue and expense recognition. By matching revenues with expenses, the accrual method gives a more accurate picture of a company’s true financial condition.

Under the accrual method, transactions are recorded when they are incurred rather than awaiting payment. This means a purchase order is recorded as revenue even though the funds are not received immediately. The same goes for expenses in that they are recorded even though no payment has been made.