Accounting Method

[RDY2RTR]

I'm looking for the definition of cash basis, modified cash basis and accrual basis for 5500 reporting. The 5500 Form instructions say we can use either method, but the instructions don't define the methods. Any help would be greatly appreciated!

[david rigby]

Does wikipedia help?

http://en.wikipedia.org/wiki/Accounting_methods

[Guest fvel]

In simplistic terms, cash basis is utilized when financial transaction leads to immediate realization of cash received for corresponding sale. Expenses are realized when paid with cash/check during the period, (cash account is directly affected.)

accrual method is when you earn revenue in the period/month and record the transaction as a sale, although the cash may not be received yet. Expenses are recorded when incurred, but not necessarily paid and may reflect a liability on the financial statements, (the cash account may not be directly affected by the transaction.)