1.4 Accounting Basis
1.4.1 Accrual Basis
Accounting recognizes the effects of transactions and other events when they occur rather than only when cash or its equivalent is received or paid,and reports these effects in the financial statements of the periods to which they relate.This is known as the accrual basis of accounting.The accrual basis recognizes that a company's financial position and performance can change without any cash changing hands,although it usually occurs with a right to receive cash or an obligation to pay cash in the future.Accrual accounting recognizes these changes when they occur.
1.4.2 Cash Basis
An alternative to the accrual basis of accounting is the cash basis of accounting,which recognizes changes in financial position and performance only when cash is received or paid.The cash basis of accounting is not consistent with IASB framework.