Explain the Differences Between the Cash Basis and Accrual Basis

question 19

Essay

Explain the differences between the cash basis and accrual basis of accounting and how the adjusting process fits in.

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Definitions:

FOB Destination

A shipping term indicating that the seller owns the goods in transit and is responsible for freight charges and any damage until the goods are delivered to the buyer’s location.

Freight Costs

Expenses associated with transporting goods between the vendor and the buyer, which may be borne by either party.

Sales Discount

A reduction from the usual cost of a product or service offered to customers to encourage prompt payment or increase sales.

Customers Pay

refers to the transactions where customers remit payment for goods or services received from a business.