Selecting accrual or cash basis accounting for a new business

Please help with this assignment.

You have been assigned to consult a new business startup. Should they use accrual or cash basis accounting? Explain your choice.

© SolutionLibrary Inc. solutionlibary.com 9836dcf9d7 https://solutionlibrary.com/business/accounting/selecting-accrual-or-cash-basis-accounting-for-a-new-business-7fs4

Solution Preview

...crual based, they would be reporting and paying tax on money they may not have even received yet.

3. Another consideration for cash versus accrual is that accrual requires a more sophisticated accounting system, and many new businesses don't have the expertise for that type of accounting. A cash basis entity can summarize a checkbook and be mostly done with their year-end accounting.

4. There may be a preference on the part of the owners towards one or the other. Provided the basis of accounting makes sense when considering the nature of the business, an owner preference could certainly be accommodated.

5. The legal form of the organization can ...