arvestuspõhiseks

Arvestuspõhiseks is an Estonian term that translates to "accrual-based" or "accounting-based" in English. It refers to a method of recording financial transactions that recognizes revenues and expenses when they are earned or incurred, regardless of when the cash is actually received or paid. This stands in contrast to cash-basis accounting, where transactions are recorded only when cash changes hands.

In accrual-based accounting, revenues are recorded when a company provides goods or services, even if the customer has not yet paid. Similarly, expenses are recorded when a company incurs a cost, such as using supplies or paying employee salaries, even if the payment has not yet been made. This approach provides a more accurate picture of a company's financial performance and position over a specific period because it matches revenues with the expenses incurred to generate them.

The adoption of arvestuspõhiseks accounting is often mandated by accounting standards for businesses, particularly larger ones, as it is considered a more robust and reliable method for financial reporting. It allows for better forecasting and decision-making by reflecting the economic reality of transactions rather than just the movement of cash. For example, a company might show a profit on its income statement even if it has a negative cash balance if it has significant accounts receivable. Conversely, a company could have a positive cash balance but a net loss if it has substantial unearned revenue or accrued expenses.