business

Cash vs Accrual Accounting

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The world of financial accounting can be a stressful place for businesses, as they must choose between two ways of handling transactions. The two most widely used methods are cash accounting and accrual accounting. The choice between these two methods can have a significant impact on a business’s finances.

Cash Accounting

Cash accounting is a straightforward method that records revenue and expenses only when cash is received or paid. Since this method is so simple, that it is often used by small businesses or sole proprietors. For example, a business using cash accounting would not record the transaction until the customer has actually paid, and for an expense, it would only be recorded once the money has left the company’s bank account. This method gives a clear picture of how much money the company has on hand. In some circumstances, the business can defer income recognition, therefor lowering taxable income in the short term. The downsides of this method are that it only really works for small businesses, because it can not keep up with the demand from a larger company. It also may not reflect the true financial position, especially if revenues and expenses are not matched in the same period.

Accrual Accounting

Accrual accounting records expenses and revenue when they are earned or incurred, regardless of when the money is received. For example, if there is a customer transaction in September and the money is received in October, the transaction will still be recorded in September. This method reflects obligations and earned income, allowing the company to make more informed decisions. This method is definitely more complicated and requires more knowledge. A downside with this method is a company can appear profitable on paper but face cash shortages because revenue has not been recorded yet.

The choice between the two methods depends on a few factors, such as the size of the company and its financial needs. Cash accounting provides a simple way of tracking funds, making it best for smaller businesses. Accrual accounting, on the other hand, provides a more comprehensive method for companies that need to follow accounting standards. Understanding the strengths and weaknesses of each method is crucial for understanding which method works best for you.

Nike

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Nike Inc. is one of the most popular and influential sports wear brands in the world. Founded in 1964 as Blue Ribbon Sports, it officially became Nike Inc. in 1971. The company has grown from a small Japanese footwear brand to a multibillion-dollar sports wear brand sold across the world. Nike is known for its powerful branding and cultural relevance. It has not only changed the sports wear industry but has also played a significant role in changing fashion trends and marketing.

Nike was founded by Phil Knight and Bill Bowerman. Knight was a track athlete at the University of Oregon, and Bill was his coach. They started by selling imported Japanese shoes and eventually launched their own brand, “Nike”. When trying to come up with a logo, they asked a fellow student to design one, paying him just $35. This is how Nike got its iconic swoosh logo. The first pairs of shoes were sold from the trunk of a car. The company kept growing but gained lots of popularity in the 1980s when it partnered with basketball legend Michael Jordan. This established a new standard for athlete endorsements. Over the years, Nike expanded its product line and global reach, making it a multibillion-dollar corporation.

The iconic slogan “Just Do It”, introduced in 1988, is one of the most recognized and effective slogans in marketing history. Nike’s marketing strategy emphasizes empowerment, achievement, and individuality. By partnering with world-famous athletes such as Serena Williams or LeBron James, Nike links itself with excellence. When it comes to their product, they conduct extensive research to improve athlete technology.

Nike has become more than just a sports wear company; it is a symbol of aspiration, confidence, and discipline. Through its powerful advertising and cutting-edge technology, Nike has cemented its place not only in the sports industry but in global culture.