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Covering the differences with cash and accrual accounting
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Cash accounting is what you might see
with a classic entrepreneurial business,
0:00
like a small mom and pop store.
0:00
They have the register which
holds all the cash and
0:03
it goes up and
down when they buy and sell stuff.
0:06
That's known as cash accounting.
0:09
Accrual accounting, which is the dominant
form of accounting on financial
0:12
statements, seeks to present the financial
statements based on when revenue or
0:15
costs are actually incurred,
instead of when the cash comes in and out.
0:21
Accounting standards provide guidance and
0:27
rules on how to handle these differences
in when the cash comes in and
0:29
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