Accrual versus Cash-Basis Accounting Methods: An Agency-Theoretic Comparison

Accrual versus Cash-Basis Accounting Methods: An Agency-Theoretic Comparison

In an agency setting with moral hazard, this paper analytically demonstrates that accrual accounting is superior to cash-basis accounting (subject to costs). The main reason is that accrual accounting information more fully reflects the overall effects of managerial actions or efforts on future cash...

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Main Author: KWON, Young Koan
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 1989
Subjects:
Accounting
Corporate Finance
Online Access:https://ink.library.smu.edu.sg/soa_research/699
http://dx.doi.org/10.1016/0278-4254(89)90015-x
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Institution: Singapore Management University
Language: English
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spelling sg-smu-ink.soa_research-16982010-09-22T14:30:04Z Accrual versus Cash-Basis Accounting Methods: An Agency-Theoretic Comparison KWON, Young Koan In an agency setting with moral hazard, this paper analytically demonstrates that accrual accounting is superior to cash-basis accounting (subject to costs). The main reason is that accrual accounting information more fully reflects the overall effects of managerial actions or efforts on future cash flows than cash flow realizations in any given period. As a result, accrual accounting information is more efficient than cash-basis accounting information for both motivating managers to expend efforts and sharing risks under moral hazard. 1989-01-01T08:00:00Z text https://ink.library.smu.edu.sg/soa_research/699 info:doi/10.1016/0278-4254(89)90015-x http://dx.doi.org/10.1016/0278-4254(89)90015-x Research Collection School Of Accountancy eng Institutional Knowledge at Singapore Management University Accounting Corporate Finance
institution Singapore Management University
building SMU Libraries
continent Asia
country Singapore
Singapore
content_provider SMU Libraries
collection InK@SMU
language English
topic Accounting
Corporate Finance
spellingShingle Accounting
Corporate Finance
KWON, Young Koan
Accrual versus Cash-Basis Accounting Methods: An Agency-Theoretic Comparison
description In an agency setting with moral hazard, this paper analytically demonstrates that accrual accounting is superior to cash-basis accounting (subject to costs). The main reason is that accrual accounting information more fully reflects the overall effects of managerial actions or efforts on future cash flows than cash flow realizations in any given period. As a result, accrual accounting information is more efficient than cash-basis accounting information for both motivating managers to expend efforts and sharing risks under moral hazard.
format text
author KWON, Young Koan
author_facet KWON, Young Koan
author_sort KWON, Young Koan
title Accrual versus Cash-Basis Accounting Methods: An Agency-Theoretic Comparison
title_short Accrual versus Cash-Basis Accounting Methods: An Agency-Theoretic Comparison
title_full Accrual versus Cash-Basis Accounting Methods: An Agency-Theoretic Comparison
title_fullStr Accrual versus Cash-Basis Accounting Methods: An Agency-Theoretic Comparison
title_full_unstemmed Accrual versus Cash-Basis Accounting Methods: An Agency-Theoretic Comparison
title_sort accrual versus cash-basis accounting methods: an agency-theoretic comparison
publisher Institutional Knowledge at Singapore Management University
publishDate 1989
url https://ink.library.smu.edu.sg/soa_research/699
http://dx.doi.org/10.1016/0278-4254(89)90015-x
_version_ 1770568959682150400

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