The accounting differences between cash and receivables
1. What are the accounting differences between cash and receivables from the perspective of a buyer? A seller? How does the accounting basis (cash vs. accrual) an organization chooses change these differences?
Student Post Question
2. The differences between cash and receivables from the perspective of a buyer is that the cash is a set amount that buyers are responsible for paying at the time of purchase. It is basically an upfront cost in order to leave with the product. Receivable are more along the lines of a loan. You are responsible for paying on it for a given time until the amount has been paid in full. When doing it this way, you also have to factor in the interest that will accrue over a period of time as well. From a seller perspective, it is sort of similar but different. The cash is the money received at the time a buyer purchases a product. Receivables on the other hand is a risky situation. The seller is trusting that the buyer will pay the amount back over a period of time with interest being factored into the cost as well. The major difference is how and when these transactions are recorded. The basis an organization chooses definitely changes these different. Cash Basis, records when the cash is received, whereas,
the accrual method records revenue when a sale is earned
3. Why is it important to have effective control of cash? ( Professor Post)
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