Cash Basis and Accrual Basis

Motor Vehicle:         [pic 1][pic 2] = 576

Medical Equipment:        [pic 3][pic 4] = 1030

Loan Interest:         [pic 5][pic 6] = 239

Insurance:         [pic 7][pic 8]

Rent:                 [pic 9][pic 10]

Office Supplies:                [pic 11][pic 12]

Medical Supplies:         [pic 13][pic 14]

Staff Wages:         [pic 15][pic 16]

Cash basis and accrual basis are two different method to record accounting transactions. For cash basis, the revenue and expense are only recorded in income statement when the cash is received and paid, it is a simple and flexible way which is very suitable for the small business and start-up company, but this method will usually overestimate the probability of the firm especially in long term, it dose not consider the the the balance between cash and account payable. For accrual basis, the revenue and expense will be recorded when it is happened and no matter the cash paid or received, for example, company provide the service but not receive the cash payment from customer, this transaction should be recorded for accrual basis,  this method consider the balance between account payable and receivable which can provide more accurate picture of financial situation of a firm (Morah, 2018).

In the case of Best Friends Vet Clinic, there is a accrual profit of $1743 but the loss of $600 for cash basis. Cash loss $600 reflect the firm actually pay more cash than received, some service is not recorded because of the company is not received cash yet because credit payment by customer. Accrual profit record the transaction that earned but not received, like provided the desexing, vaccination and  consultation service to customer, the company not received credit payment yet, so it provides the more accurate and clear picture of firm’s financial situation.