Lesson: Special Purpose Frameworks: Accrual vs Cash Basis Accounting Overview

In this lesson, Nick Palazzolo sheds light on the Special Purpose Frameworks, focusing specifically on the distinctions between accrual and cash basis accounting. He illustrates why understanding both methods is crucial, even though accrual basis is mainly associated with the Financial Accounting and Reporting (FAR) section of the exam, and cash basis with the Regulation (REG) section. Nick clarifies situations in which smaller companies may opt for cash basis reporting and the subsequent need for conversions to accrual basis, mentioning its relevance for cash flow analysis. He sets the stage for this concept’s crossover between FAR and REG, providing just the right blend of insight to prepare for both sections without feeling overwhelmed.