Many business and commercial lenders, plus credit analysts and portfolio managers, work primarily from company-prepared financial statements, along with business tax returns. One of the key issues in analyzing these documents is identifying the method of accounting being used. Much like two different, foreign languages can take the same text and render it into two different-looking documents, each method of accounting takes the same financial transactions and puts them together into two different-looking financial statements. Do you know the key differences in how cash and accrual method accounting handle these financial transactions? Can you “translate” between the two methods? Do you know which method your borrower is using?
This program provides a refresher for the key issues in determining which method of accounting is being used, and what it means for the analysis process. We also cover how and why either method is appropriate for some businesses. It’s not a matter of which one is “best,” it’s a matter of “fit.”

Attendees will learn to:

• Compare and contrast the cash method and accrual method of accounting
• For an example business (case), construct the conventional balance sheet, income statement and statement of cash flows on BOTH the cash and accrual basis
• Identify key differences in how individual transactions are handled between cash and accrual accounting, plus the effect on the perception of performance
• Describe where to find key indicators of the method being used, including where they are disclosed in various business tax return format.
• Describe how the statement of cash flows serves as a translator between cash and accrual accounting
• Why other comprehensive bases of accounting (cash and income tax) are appropriate for many smaller businesses