i. Differences between Accounting Bases

• Cash Basis: Recognizes revenue and expenses only when cash is received or paid. It does not match income with expenses incurred in the same period.
• Accrual Basis: Recognizes revenue when earned and expenses when incurred, regardless of when cash transactions occur. It provides a more accurate picture of a company’s financial position.
• Break-up Basis: Assumes that a business will not continue as a going concern, and assets are valued at their realizable amounts rather than their carrying amounts.

ii. Setback of Cash Basis

• It does not provide a true picture of financial performance, as income and expenses may not be recorded in the period to which they relate.