I own an used car lot, wondering which method of accounting is better ?
2006-09-22 11:43:38 · 6 answers · asked by anaangel94804 2 in Business & Finance ➔ Small Business
We do have 4 ar, as well as the lot fill with inventory
2006-09-22 11:53:24 · update #1
You will have a deeper understanding of your business with an accrual basis accounting.
The reason is that this system takes into account money that others owe to you (i.e. customers) , money that you owe to others (i.e. suppliers), cash that you have but actually is not yours (i.e. taxes that you collected but you will pay to the Government), etc.
At the same time, you need to project your cash on an on-going basis.
The main reason to go out of business is not paying attention to cash needs, and look only to accrual accounting.
2006-09-22 11:58:05 · answer #1 · answered by oldmarketeer 3 · 0⤊ 0⤋
In reality, you'll probably use elements of both.
For sure you'll use accrual accounting for the actual car inventory. Also probably for parts in the service department and so forth. If you do any kind of financing of the vehicles, that will be accrual as well.
I'd guess you'll use the cash method for payroll, incidental supplies, etc.
Good luck!
2006-09-22 11:49:10 · answer #2 · answered by Nobody 4 · 0⤊ 0⤋
Most accountants will recommend the accrual system but it really depends on if you have inventory, large receivables and payables. You should really talk to an accountant that you trust.
2006-09-22 11:49:11 · answer #3 · answered by David P 3 · 0⤊ 0⤋
Accrual - because it recognizes income and expenses as they are incurred.
2006-09-22 14:14:58 · answer #4 · answered by Anonymous · 0⤊ 0⤋
cash accounting is better
2006-09-25 23:25:36 · answer #5 · answered by Anonymous · 0⤊ 0⤋
used cars, I would say cash
2006-09-22 11:47:29 · answer #6 · answered by The Advocate 4 · 0⤊ 0⤋