The critical difference between accrual accounting and cash accounting is in the timing in which purchases and sales are recorded in the account. Accrual accounting only recognises expenses when they have been billed, and revenue is recognised once it is earned. This is in stark contrast to cash accounting which distinguishes the two variables when money is transacted (Loughran, T., 2016).
Financial statements are records of the situation of a business and are designed to meet the needs of multiple diverse users. It is a commonplace for accounts to use generally accepted accounting principles in recording and reporting their financial information. GAAP financial statements are set up to expose financial statement data to regulators and investors thus making a business’s financial statement to be available for scrutiny (Williams, E. E., 2017).
Auditors have been refrained from fraud due to the possibility of getting sued by their business clients, third parties involved or even legal action from the government. They exist considerable evidence of the positive impacts external auditors have on the overall qualities of financial statements. External auditing may however greatly inconvenience a business’s financial statements as it may at times be hard to hold external auditors accountable for errors in the financial statements detected after completion of a contract.
If projects cost are included in the overall expenses reflected in a company’s financial statement and budget, it is critical for tremendous and sufficient auditing to be done to have a precise estimation of the cost incurred. Project managers to report project costs in alignment with the companies accounting practices should document any vital information for the project, the resources and equipment involved in the project, human resources, communication tools and software if any need to be extensively detailed. The project manager ought to comply with guidelines provided by the company and also produce manifest files, record sheets and catalogues that the company can easily interpret (Kerzner, H., 2017).
Loughran, T., & McDonald, B. (2016). Textual analysis in accounting and finance: A survey. Journal of Accounting Research, 54(4), 1187-1230.
Williams, E. E., & Dobelman, J. A. (2017). Financial statement analysis. World Scientific Book Chapters, 109-169.
Zeff, S. A. (2016). Forging accounting principles in five countries: A history and an analysis of trends. Routledge.
Kerzner, H., & Kerzner, H. R. (2017). Project management: a systems approach to planning, scheduling, and controlling. John Wiley & Sons.
Harrison, F., & Lock, D. (2017). Advanced project management: a structured approach. Routledge.