Читать книгу Cost Accounting For Dummies - Kenneth W. Boyd - Страница 56

There’s a problem with the cash basis of accounting — it doesn’t follow the matching principle. This principle requires accountants post revenue when it’s earned and expenses when they are incurred.

The matching principle is a two-step process. Your first step is to determine when revenue is earned. You earn revenue when you deliver your product (as explained earlier), or complete a service you perform for a customer. You may receive payment in advance of the delivery, or a few weeks after the delivery. When you earn, the revenue may be different from when you receive the cash payment.

For a retailer, revenue is earned when the customer walks out of the store with, say, a new baseball glove. If you’re a tax preparer, you earn revenue when you deliver a completed tax return to your client.

After you determine when revenue is earned, you match the revenue to the expenses that are related to the product or service. The retailer would match the inventory cost of the glove with the baseball glove’s revenue. The tax preparer would match the labor cost paid to the staff with the revenue from the tax return.

Because the cash basis doesn’t follow the matching principle, the method is used only by very small businesses. Everyone else uses the accrual method of accounting.