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A Comparison of Financial Results Based on Accrual and Cash Accounting Data

In: Eurasian Business Perspectives

Author

Listed:
  • Edyta Mioduchowska-Jaroszewicz

    (University of Szczecin)

Abstract

This article aims to investigate the relationship between the indicators commonly used to assess a financial situation based on accrual and cash flow accounting. A company’s financial result is distorted in different ways. Cash flows compared to financial results are not subject to manipulation resulting from accounting policies employed in a given business entity. Hence, formulated hypothesis assumes that the assessment of profitability carried out with the use of cash flow indicators reflects the true and reliable image of a company, in contrast to the indicators based on a financial result. The hypothesis about dissimilarity of the assessment of a financial condition has been proven by the analysis of the correlation between the accrual and cash results The analysis of a financial situation based on cash flows led to a conclusion that a financial situation is more complete, reliable and not affected by balance and tax policy, but there are also differences between the assessment based on financial ratios calculated on the basis of accrual data (the balance sheet and the profit and loss account) and the financial situation of the studied companies based on cash data The article uses the method of economic analysis, descriptive statistics and correlation analysis.

Suggested Citation

  • Edyta Mioduchowska-Jaroszewicz, 2018. "A Comparison of Financial Results Based on Accrual and Cash Accounting Data," Eurasian Studies in Business and Economics, in: Mehmet Huseyin Bilgin & Hakan Danis & Ender Demir & Ugur Can (ed.), Eurasian Business Perspectives, pages 89-103, Springer.
    • Handle: RePEc:spr:eurchp:978-3-319-67913-6_6
    DOI: 10.1007/978-3-319-67913-6_6
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