Choose ONE (1) question below to discuss and then respond to TWO (2) of your classmates answers (Try not to repeat others answers). Include the question with your response.

1. Discuss the key differences between cash and accrual accounting? Explain why most health entities use accrual accounting.
2. What is the matching principle? Explain and detail what methods of accounting and what types of assets most easily conform to the matching principle.
3. What is the revenue recognition principle?
4. What are Generally Accepted Accounting Principles (GAAP)? Why are they important?
5. What is a “qualified opinion” in an external audit? Is this good for the firm? Why?

Make sure you are properly citing your source(s) and providing your reference(s) for information you obtain from another source. Please review the Discussion Expectations and Grading posting if you have any questions regarding answering the discussion question and/or responding to your peers.

SOLUTION

1. Discuss the key differences between cash and accrual accounting. Explain why most health entities use accrual accounting.

According to Reiter and Song (2021), cash and accrual accounting are the two main methods for tracking financial transactions, and they differ dramatically in how and when revenue and expenses are recognized. Cash accounting exclusively records transactions that involve the exchange of cash. This means that revenue is recognized when payment is received, but expenses are recorded when payment is made. This simple method clearly shows how much cash a corporation has at any given time. However, it may not fully reflect a company’s financial status because it needs to account for outstanding receivables or payables.

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