Accrual Basis
Accrual Basis is a fundamental way of tracking money in business accounting that shows when things actually happen, not just when money changes hands. Think of it like recording a sale when you make it, even if the customer hasn't paid yet. It's different from cash basis accounting, which only records transactions when money is received or paid. Most larger companies and professional accountants use this method because it gives a more accurate picture of a company's financial health. It's considered the standard method for serious business accounting and is required for many larger organizations.
Examples in Resumes
Managed $2M annual budget using Accrual Basis accounting principles
Transitioned company from cash basis to Accrual Based accounting system
Prepared monthly financial statements following Accrual Accounting standards
Typical job title: "Accountants"
Also try searching for:
Where to Find Accountants
Professional Organizations
Online Communities
Job Boards
Example Interview Questions
Senior Level Questions
Q: How would you explain the difference between accrual basis and cash basis accounting to a new business owner?
Expected Answer: A senior accountant should provide a clear, simple explanation using real-world examples, discussing the advantages and disadvantages of each method, and when each is most appropriate for different types of businesses.
Q: Can you describe a situation where accrual accounting significantly impacted financial reporting?
Expected Answer: Should provide specific examples of how accrual accounting affected financial statements, such as recognizing revenue before payment or recording expenses before they're paid, and how this provided better business insights.
Mid Level Questions
Q: What are the main adjusting entries needed in accrual accounting?
Expected Answer: Should be able to explain common adjusting entries like accrued revenues, prepaid expenses, and depreciation in simple terms, with examples of when and why they're needed.
Q: How do you handle year-end accruals?
Expected Answer: Should explain the process of identifying and recording expenses and revenues that belong in the current year but haven't been recorded yet, using straightforward examples.
Junior Level Questions
Q: What is the basic principle of accrual accounting?
Expected Answer: Should explain that transactions are recorded when they occur, not when cash changes hands, using simple examples like recording a sale when the customer is billed rather than when they pay.
Q: How do you record an accrued expense?
Expected Answer: Should be able to explain the basic process of recording expenses that have been incurred but not yet paid, such as utilities used but not yet billed.
Experience Level Indicators
Junior (0-2 years)
- Basic bookkeeping principles
- Understanding of basic accrual concepts
- Recording simple transactions
- Basic financial statement preparation
Mid (2-5 years)
- Managing complex accruals
- Month-end closing procedures
- Financial statement analysis
- Reconciliation processes
Senior (5+ years)
- Advanced financial reporting
- System implementation and improvement
- Training and supervision
- Complex accounting policies
Red Flags to Watch For
- No understanding of basic accounting principles
- Confusion between cash and accrual methods
- Inability to explain adjusting entries
- Lack of experience with financial statements
