Accounting Paper on cash-basis accounting and accrual accounting
The difference between cash-basis accounting and accrual accounting emanates from the recording of cash in and cash out of the business. First, cash-basis accounting considers income and expenses when the actual activities take place. This means that the recording of an expense will be done immediately cash is paid for the specific expense rather than intended payment. The same case happens to income where the gains are only entered into the books of accounting when money is paid or received by the entity (Feldmann and Rupert 67). The second method is accrual accounting, which treats revenues/expenses in terms of activities and plans to execute these activities. Therefore, the economic events that lead to spending or income generation will be compared and recorded accordingly. As such, future and current events are considered to come up with a comprehensive accounting statement. The method is considered to be faulty due to the inclusion of unrealized incomes or predetermined spending.
The utilization of inventories within an entity depends on the flow of goods in and out of the organization. This means that the management will order supplies that commensurate demand to avoid holding up capital in slow-moving inventories. Most organizations come up with a program that allows them order goods only when they reach the re-order level. This will ensure that capital is maximally used while inventories are replenished as expected. My thinking about mileage is that the entity should ensure to implement a spending cap on transport so that they do not end up spending a lot of money visiting clients (Feldmann and Rupert 56). This will help the entity manage spending on mileage as well as accounts for the investments on these activities. The returns from such endeavors will be compared against spending to determine their validity.
Works Cited
Feldmann, Dorothy, and Rupert, Timothy J. Advances in Accounting Education: Teaching and Curriculum Innovations. Emerald, 2012.