This paper explains that, in cash basis or cash accounting, businesses record transactions only if they involve the payment
or receipt of cash, which does a poor job of matching revenues earned with money laid out for expenses. The author points out that, in accrual accounting, the economic impact of a
transaction is recorded whether or not the transaction involves cash, which does a better job of matching revenues with expenses and of handling items such as property and equipment. The paper relates that the four statements used in the accrual method accounting are the balance sheet, the income
statement, the statement of cash flows and the statement of stockholders' equity.