I could do with some opinions please.
The company I am employed with would like me to change our accounting method from cash accounting to accrual accounting.
I cant see any benefit to this because I track each contract & budget closely & the monthly management reports I produce / mainly budget reports shows them everything that they need to know.
They are concerned with what other businesses are doing & what financial reports external people would like to see ie if they wanted a bank loan or were to sell the business.
Accrual accounting is a lot of extra work because of the way our 7 contracts work.The Year End Accounts are done via the accountants on an accrual basis, all of our contracts tie in with our year end so there are not many adjustments.
Also I do prepayments / accruals relating to things in the overheads ie rent / insurance
In January For one contract we might receive ?100k income, of that ?15k is our management fee ie Profit & the ?85k is going to be spent at some point in the year.
Then we might pay for ?30k of expenses in Jan, but ?20k could relate to different months ie we pay ?5k for accommodation in Jan, but the training course is not until Feb.
Every single sales invoice, purchase invoice relates to different months!
Do any of you do Accrual Accounting?
Thanks in advance for your advise!
Source: http://www.ukbusinessforums.co.uk/forums/showthread.php?t=288099
Jordyn Wieber michael phelps Kerri Strug Ledecky Nadia Comaneci Rebecca Soni Snoop Lion
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