yo yo yo CPA strengtH here back with another accounting for beginners video
this happens to be number 102 and accounting for beginners playlist my
classic series all right look I got a whole other playlist a bunch of other
videos I have and this this video is gonna be y'all ready to have some fun
man come on let's get it in let's get it in
let's get it in come on this is gonna be a crude first cash basis basically we're
gonna talk about rules for just a couple of minutes now if you want to go through
my playlist I do have these are accruals touch on touches on adjusting adjusting
entries and I have videos I think 31 32 early 30s who don't my plan is to have a
bunch of videos on adjusting entries accruals deferrals I don't think I
specifically touched on a crude verse cash basis and what that is now bigger
and bigger huge and bigger companies is a followed by GAAP generally accepted
accounting principles I don't want to get in basically a lot of bigger
companies would do accruals would have accrued expenses accrued revenues and
smaller companies would have cash basis you would accrue accrue revenues and
expenses to do to use the matching principle to mean when in a crude
revenue you earned the revenue but you haven't been been paid to cash all been
paid the cash yet so you did the work you haven't been paid the cash so to
keep it maybe on a yearly income statement let's just say let's just go
by the end of the year you did the work for someone at Neuve in December okay
but you didn't get paid at the end of the year now you have to do your income
statement and balance sheet your financials for the end of the year
but you haven't got paid well when you have a big a big huge multi-million
dollar business you want to keep your it's called a mad matching principle you
want to match up your expenses and your revenues so you would do a journey you
would do a journal entry recording recording your revenue but not but not
the money you got yet you wouldn't record the money because you didn't get
the money so that's an accrued expense accrued is nope no cash ok Croods no
cash yet for the crude expense it's a service performed to pay later so you
would write down that someone did the work for you to record the expense but
then you would record the payment later I have journal entries and other videos
and stuff now let's get to the more easy the more cash basis you record you don't
do you don't do any journal entries or any recording until cash hits your
sticky little hands now I remember that from a class I took in in college I
always wrote out and the teacher said and the cash sticks when a cash gets
your little hands ok accrual accrual is a matching principle and revenue
recognition and all that the the cash basis is way more easier and then small
smaller businesses like service businesses and stuff can that's not
really going to mess up mess up everything too much you know how we're
going to mess up their books too much they don't have a multi-million dollar
business a lot of smaller businesses use cash the cash basis because it's easy
now you have to be consistent whether you're doing accrual or cash basis you
can't switch back and forth so you know accrual is one near is when you're
waiting you know waiting to record for whatever reason because of different
periods and you want to keep your periods straight and congruent like like
you know when you when you actually had the revenue come in or when
you had the expense go out you want to record the revenue or the expense and
the period happened just to keep some say oh we had a good month here or a bad
month here or a bad year good year now the cash basis doesn't really matter at
all that it just matters when the cash hits your sticky little hands or you
give your cash little sticky hands right you know and you can just go by like did
you get did you get cash yet did you pay cash for it if it's on cash basis you're
not you're not gonna you're not gonna record it yet
I think that's the biggest that's the biggest difference between the two and
yeah this is just a short little video a cruel burst cash basis all right a crude
revenue earned but not paid cash yet accrued expenses service performed by
paid later cash basis you record when the cash hits your sticky little hands
all right I was just a quick little video I hope everyone enjoyed it I will
see y'all next time all right CPI strength a time out doses