Accrual Base Accounting and cash based accounting are 2 methods employed by managers in financial reporting of the earnings of a company over a period. As per Generally accepted accounting principles (GAAP), a company has a choice in application of accounting methods which is often referred to as earning management.
Accrual based accounting is a form of measuring the income where the effect of transaction is recorded when the transaction occurs rather than being recorded when cash is received or paid, which is the cash based accounting method. This method enables the combining of the current cash inflows and outflows with future expected cash ...
