Accounting
This discussion contains research pertaining to the impact of cash-basis accounting on the distortion of the financial position and operating results of a business.
We began our discussion with a definition of cash base analysis. We concluded that this accounting tactic is used to examine cash and cash equivalents. This is done by separating cash flow transaction into one of three activities which include; operating, financing and investing activities.
Our investigation then explored why and how financial statements completed using cash-basis accounting can be distorted to present a misleading picture about the financial position and operating results of a company. Our investigation found that these distortions exist when accountants fail to provide a report of additional information that may not appear on the face of the financial statement. Additionally, we found that inconsistencies in the presentation of a financial statement can greatly influence the distortion of information that is found in the statement,
Introduction
Efficient accounting practices are essential to the success of any business. In recent years the accounting profession has come under great scrutiny for the use of questionable accounting methods. One method that has come into question is cash basis accounting. The purpose of this discussion is to examine whether financial statements prepared on a cash basis of accounting may distort the portrayal of financial position and operating results of a business.
According to a report published by the International Federation of Accountants, cash basis accounting is defined as, basis of accounting that recognizes transactions and other events when cash is received or paid. It measures financial results for a period as the difference between cash received and cash...
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