Accounting Management

Underlying assumptions

Accrual basis:

Under the basis, the effects of transactions and other events are recorded when they occur and not when cash is received or paid (unless they are purely cash transactions). 

Financial statements prepared on the accrual basis inform users of past transactions involving cash payments and receipts, as well as of obligations to pay cash and of resources that represent cash still to be received in the future. (Framework .22.)

The financial position of an entity changes whenever cash is received or when cash is paid. Cash transactions are not the only transactions that have an influence on the financial position. Numerous transactions and events take place before cash receipts or payment occur.