I am taking an accounting class and we are being asked to comment on discussion question answers that are posted. I need some help responding to this question in a discussion format and I must have a reference. Any help you can give me would be much appreciated!

The timing of recording financial transactions is important. Explain the difference between cash and accrual basis of accounting in terms of when transactions are recorded. Is one more beneficial than the other? Explain your answer.

When sales and expenditure are understood, the greatest difference between the accrual accounting and cash. The cash approach is to consider revenue and expenditures more quickly while the accrual method focuses on forecasted revenue and expenditure. Accrual accounts are the method of identifying and tracking income and expenditure while cash-based accounts are the same as cash-based accounts. Cash-based accounting is simpler, but accrual accounting provides a more realistic financial image of the wellbeing of a business by including payments due and debatable. The main benefit of the cash approach is its ease it only pays or collects cash. The cash approach also allows the monitoring of a company's cash flow.

However, the cash approach has a drawback because it can over-report the health of a cash-rich company, but has huge amounts of accounts payable far exceeding the ledger cash and the actual revenue stream of the business. An investor may believe that the company gains when the company actually loses money.

Meanwhile, the benefit of the accrual approach is that it involves receivables from payroll and payables and thus offers a more reliable summary, especially in the long run, of the company's profitability. The reasons for this are that when they are received and when they are lost, the accrual system tracks all revenues.