From the course: Finance and Accounting Tips

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Accrual accounting

Accrual accounting

From the course: Finance and Accounting Tips

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Accrual accounting

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- For the year end of June 30, 2016, Microsoft reported net income for the year just ended of almost 17 billion dollars. For the same period of time, the company reported cash from operations of over 33 billion dollars. - How did Microsoft do for the year? Did they make 17 billion or 33 billion? Individuals often confuse net income with cash from operations. - Well isn't net income supposed to be equal to the amount of cash generated from the successful operations of a business? - No. For a variety of reasons most of them related to the concept of accrual accounting, net income and cash flow from operations are seldom the same number. - What is this concept called accrual accounting? - Accrual, not cruel, accrual accounting means that revenues are recognized or recorded on a company's books when they are earned without regard to when the cash is received. Expenses are recorded as they are incurred without regard for when they are paid. - What you're saying is that when a company does…

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