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A Critical Examination of Accrual Accounting.
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A Critical Examination of Accrual Accounting With the development of economic activities, it is necessary to have an appropriate way to keep accounts. Nowadays, most governments and corporations adopt accrual accounting. Definition and principles Accrual accounting focuses on the assets and services sold by the firm during the accounting period and the assets and services consumed by it in that period in order to achieve those sales. (Gillespie, 2000, pp65) There are two principles applied in accrual accounting: realization and matching. Realization refers that revenue should be recorded when sales have occurred and matching means the expenses should be recognized in the same period when the revenues are earned and recognized. Illustrate by examples The accrual accounting is widely used in many corporations and many countries such as the United Kingdom and United States. For example, an entity has got an order, so in the fist year the entity prepared for the...
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