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QUESTION DETAIL
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I recently was given a balance sheet and income statement and noticed that the balance sheet was prepared on an accrual basis, but the income statement was prepared on a cash basis. When I questioned the purpose for doing this I was told that they wanted to recognize pledges on the balance sheet and didn't want to reflect income until it was received. Is it ever permissible to present a set of financials and use a different basis among them?
ANSWER
The BIDaWIZ Team's Answer:
We believe that you are referring to the modified accrual basis of accounting which incorporates a hybrid approach to accounting reporting as defined in IRC Section 446(c)(4) and IRS Publication 538. This would be allowed based on the facts and circumstances that you've provided.
