SPW hat 4 Why is it appropriate to use cash basis accounting

SPW hat 4. Why is it appropriate to use cash basis accounting in your advertis personal life but not in the business worN? e

Solution

It is more appropriate to use cash basis accounting in personal life, in cash basis you will do all the expenses in cash only not on credit basis so it will have a check on limited use of money and you would not need to borrow money. In Personal life most of the expenses are unproductive and you will have to pay fixed charges in the form of interest to the lender.

while in case of business world, most of the expenses are productive in nature and which results in income or profit so borrowed money is generally preferred in business transaction rather than personal life.