Accounting and Business Research | Assignment

Running Head: ACCOUNTING 1
ACCOUNTING

Running Head: ACCOUNTING
Contents
Introduction......................................................................................................................................3
Cash-basis or an accrual-basis.........................................................................................................3
Categorization of Assets..................................................................................................................4
Conclusion.......................................................................................................................................6
References........................................................................................................................................7

Running Head: ACCOUNTING
Introduction
In this report a detailed research is conducted of the Michael’s business to identify the financial
position. As per the financial statements it can be gathered that, the company is making a loss in
the month of July. The loss amounted to $3727.8 and this also reflects that the sales are not
enough to recover the costs incurred by the company. The current assets are more than the
current liabilities which stated that the liquidity position of the company is strong; however the
profitability area needs immediate action (Cohen and Karatzimas, 2017).
Cash-basis or an accrual-basis
There are two types of the basis of accounting and the same has been explained in detail. The
two types of the accounting processes are cash basis of accounting and accrual basis of
accounting. Whereas in case of accounting, following the accrual basis of accounting is termed
as recording accounting transactions for revenue when earned and expenses when incurred
(Connectus, 2016).
The two major differences between two of the methods is as follows.
Basis Definition
Income Statement While preparing the income statement, the
income that is recorded is lower in case in of
the cash basis of accounting and the same is
higher in case of the accrual basis of
accounting.
Degree of Accuracy In case of cash accounting the degree of