Inventory Accounting in Cash Basis Accounting System:
Hello Every One,
Can any one help me out in finding out what will be the accounting treatment for inventory transaction in cash basis accounting.
Ofcourse there wont be any accural transactions, so for inventory transactions like PO the financial transaction 'll happen when you make payment in AP.
The payment accounting entries typically debit your expense or asset account and credit your cash or cash clearing account
Cash basis system records cash transactions only, and ignores everything else. It works only for very simple businesses that never buy anything on credit to be paid later, never offer customers credit, and don't manage inventory. With cash-basis accounting there are no accounts payable, no accounts receivable, and no inventory.
Cash Basis accounting has no relevancy in inventory. Its for payable and receviable.