Accounting is a process that identifies, measures and communicates business economic information in a financial register for decision-making and tax reporting purposes. Accrual Accounting and Cash Accounting are two commonly used methods. A small business that generates less than EUR 5 million service and revenue per year meets the IRS rating that allows a small business to choose one of the two accounting methods.
CPAs include many excellent online articles on the benefits and disadvantages of accounting. I noted that some CPAs claimed that accrual-based accounting was higher in accounting terms. The owner of dental practice for many years, I see that cash accounts should be the accounting of small medical / dental and other types of service businesses.
(1) Cash accounts are simple and intuitive. Nowadays, a simple accounting software program can track your business transactions without need for a bookkeeper. Only all daily transactions such as revenue (earnings) and written checks (costs) should be recorded. The program can display a monthly balance and simplify the tax reporting process by the end of the year by exporting data from the tax preparation software.
(2) Accrual accounting is a high maintenance system, which means higher professional costs for professional accounting services. Accrual accounting requires both bills and accounts payable, which must be regularly matched in the light of real financial events. These two numbers must be continuously monitored by the business owner.
(3) In medical or dental practice that accepts popular insurances, the revenue of the accounts comes from both individual patients and insurance companies. I've learned that patients who do not count their accounts on the first 30 days of billing are likely to be criminals. The health insurer sometimes puts more documents on their feet, but in two or three months pays these claims with lower benefits in contact. Therefore, the practice of earning fantastic revenue in Accrual Accounting is a false sense of big revenue, but is largely due to the low level of return and the insurance company's low rate of return. 19659002] I really believed in the KISS (Keep It Simple, Stupid) Principle. Not surprisingly, most small businesses have chosen Cash Accounting. However, cash accounts have the disadvantage of being unable to predict future revenue and cost volumes. Knowing your unique business situation, you should seek expert advice on the best way of accounting.