In many cases, accountants get set in their ways. Developing a system of completing various bookkeeping tasks and processes is necessary in this field, perhaps even more so than in other industries. A good accountant knows that success often depends on having a good method of meeting responsibilities, as well as being highly organized and keeping fantastic records.
Often, professionals prefer sticking to either the cash or accrual method of accounting. Of course, this often depends on the businesses they're working with and the leaders' preference or internal needs. However, accountants should be aware that one of these strategies might be disappearing in the relatively near future.
Information that recently came to light at the 2014 Top Producer Seminar revealed that the cash method of accounting might be going by the boards sooner rather than later in some industries.
Days are numbered
According to AG Web, the recently held farm owners event made it clear that the cash method is rapidly being filtered out in favor of the accrual method.
"I think if Congress is serious and the president is serious about getting the top corporate tax rate—and supposedly we have the highest corporate rate in the whole world—if they're serious about getting the top rate down to 28 percent or possibly 25 percent, farmers will lose the cash method of accounting," The Farm CPA Paul Neiffer told the news source.
Neiffer went on to explain that more individuals in this industry are going to be influenced to move toward the accrual method, as even dividing companies via aggregation rules and putting them under the management of different entities will mean that their revenues will have to be taken collectively.
Which method is more popular?
According to legal resource Nolo, this might be a massive change for a number of businesses, as the cash method remains the most popular means of accounting currently. The source explained that this can help company owners remain aware of how their organizations are doing in real time, as revenue isn't factored into accounting software until the cash or check is actually received, and expenses aren't credited until a withdrawal occurs.
However, the accrual method might not be completely bad, as planning ahead (i.e. accounting for debits and credits alike as soon as the check is written or organization invoiced) might be easier using this strategy. Recording a transaction as soon as it occurs, not necessarily when it is processed, can give a better view of the future trajectory of a client.