Different Types of Accounting Methods



Accounting is an integral part of any business, irrespective of its size. The process, however, is quite complex, especially because of the multiple accounting methods available at hand. Businesses already have heaps of other priority tasks. Focusing on accounting is nothing short of a challenge in this busy schedule. This is where our tax consultants in Calgary come into play.

We have appointed some of the most qualified and experienced tax consultants inCalgary to provide you with the help you need. Our team takes care of all the accounting aspects that facilitate smooth operations within your organization.

What are different accounting methods?

Accounting methods are basic rules that an organization needs to adhere to while reporting financial transactions and maintaining financial records. The two main methods of accounting are cash accounting and accrual accounting.

The cash accounting method involves the reporting and deduction of income and expenses in the tax year. The accrual method, on the contrary, involves the reporting of both income and expenses in the tax year.

What are the different types of accounting methods?

Our chartered professional accountants in Calgary are well-versed with different accounting methods. We analyze your business and implement the right method for optimum results. Here are the common types of accounting methods.

1  Cash accounting

This method is the easiest to implement and hence is used mainly by small businesses. It doesn’t adhere to the GAAP or Generally Accepted Accounting Principles. In this process, the financial transactions aren’t recorded unless they are realized.

Financial statements prepared using this technique consists of the following information:

·       Sources of cash during the tax period
·       How was the cash used?
·       The cash balances at the date of reporting

This method is most suitable for small businesses and sole proprietorships. Organizations often use it to manage personal finances to a specific limit.

2.   Accrual accounting

The main motive of this method is to match income and expenses in the correct year. The criterion is on the basis of a cause-and-effect relationship between expenses and revenue.

In other words, expenses and revenue are supposed to match in the accrual method. This is why it is considered the most accurate accounting method.

In this method, the profits are calculated only after they are earned. Similarly, expenses are recorded after being incurred.

Our team of chartered professional accountants in Calgary is here to handle your accounting worries. Share your requirements with us and let us take care of the rest.

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