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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.

The BIDaWIZ Team

 

 

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