Before discussing conversion of cash basis
financial statements, review the basics of the accounting equation that involve increases and decreases in total assets (see Table 1a).
The cash receipts and disbursements Pure cash basis
with no basis of accounting with no modifications to record items such modifications.
There's nothing wrong with using cash basis
accounting so long as it reasonably and accurately represents the true financial accounting and position of the organization," said Andrew Lang, national director of nonprofit services for BDO Seidman, an accounting and management firm based in Chicago.
At a minimum, though, the case does not stand for the proposition that a service taxpayer that keeps its books on the accrual basis is prohibited from using adjusting entries to convert to the cash basis
for tax purposes.
The modified cash basis
is a hybrid method such combines features of both the cash basis
and the accrual basis.
Modifications to the "pure" cash basis
of accounting are acceptable it they are equivalent to the accrual basis and the modifications are logical.
As an example of these built-in gain and loss provisions, in the case of a cash basis
personal service corporation that converts to S status and that has receivables at the time of the conversion, the receivables, when received, are built-in gain items.
In an interesting change in market trends, the properties were being offered with seller financing, however, most of the offers were made on an all cash basis
Special reports for cash basis
statements, profit participation, report on a statement of assets sold and liabilities transferred, reporting on the application of accounting principles, royalty reports
In certain situations, a corporation may benefit from a change in accounting method; for example, if an accrual-basis C corporation provides services on account, with payment received weeks or months after billing, a change to the cash basis
would allow it to defer income recognition until receipt of payment.
, modified cash basis
and regulatory basis financial statements for various kinds of entities