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Explain the Difference Between Accrual Basis Accounting and Cash Basis

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Essay

Explain the difference between accrual basis accounting and cash basis accounting.


Definitions:

Selling Price

The amount a company charges for its product or service, set to cover costs and generate a profit.

Net Operating Income

The total profit of a company derived from its operations, excluding non-operating income and expenses, interest, and taxes.

Monthly Sales

The total revenue obtained from sales in a specific month.

Sales Commissions

Sales commissions are payments made to sales employees, usually calculated as a percentage of the sales they generate, serving as an incentive for enhancing sales performance.

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