let's do it on an accrual basis.

let's do the accrual accounting income statement.

To see the difference between cash accounting and accrual accounting

And what I'll do, I'll do the accrual accounting right here

But when you look at the Accrual basis it actually reflected what happened.

So at least for month 1, the cash basis and the accrual basis of accounting

And I won't go too complicated into cash and accrual accounting and all that right now.

So I'm gonna start of, we're gonna focus on month 2 and what I've done is I've rewritten some of this accrual income statement down here so it really looks like a statement so this right here is the income statement for month 2 on an accrual basis.

So let's se which of these two methods of accouting, the cash method and the accrual method

So in the accrual basis of accounting, you would say that you earned 400 of revenue in this month.

But if you look at the accrual basis it better reflects that you actually did some catering that month.

This is the cash basis of accounting and this is the accrual, and let's just look at the income statement

So hopefully this gives you a idea of why accrual gives a better picture of what's happening in a buisness.

In the next video, I'll try to reconcile what the Accrual income statement is telling us and the actual cash.

So in month two I think it's fair that the Accrual method is giving us a better indication of what's actually going on.

Now there's one thing that you're probably confused by right now well you know, how do we reconcile everything with the cash we know that over this period we got 200 in income on an accrual basis.

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