How Does Accrual Basis Affect Financial Statements?
Accrual basis accounting impacts various financial statements, including the income statement, balance sheet, and cash flow statement. On the income statement, revenue is recorded when earned, and expenses are recorded when incurred, even if cash hasn't been exchanged yet. This can result in a more accurate reflection of a company's profitability over a given period. On the balance sheet, accounts such as accounts receivable and accounts payable are included, providing a clearer view of the company's assets and liabilities.