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Differences in Accounting Systems Essay

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Differences in Accounting Systems
Principles of Accounting 1
ACC 290
January 26, 2013
Differences in Accounting Systems
Commercial accounting uses the double entry system, which records both cash, and credit transactions, and the entries will not duplicate in this system. The double entry system records the date of the receipt regardless of payments made or not, these three main highlighted items help understand the statement better the gross profit, income from operations, and net income. Net sales; less cost of goods sold equals gross profit (Chapter Chapter 2, Study Objective 6). The gross profit minus the operating expenses determines the income from operations, which highlights the net income statements by adding or subtracting the related activities. The single entry accounting system records transactions of cash payments made with no explanation to whom a payment went to or who made a payment. Commercial accounting allows the business owners to know the profit and loss of the business at all times (Chapter Chapter 2, Study Objective 6).
The general accepted accounting principle also known as (GAAP) frequently used in the United States by most companies. The general accepted accounting follows specific rules and practices, recognized as the general guide for financial reporting.   The GAAP system helps business when applying for loans and seeking investors. Standardizing reporting in the four different statements ensures that information is clear, accurate, and reported in a timely manner (Chapter Chapter 2, Study Objective 6).
Accrual accounting records transactions within the period the event occurred, regardless of cash exchanging hands or not. The accrual records transactions that change the businesses financial statements, which means the system recognizes revenue in the time-period earned, known as the revenue recognition principle. In the same token, the system recognizes expenses when incurred, known as the matching of expenses (Chapter Chapter...

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