First, it is simple and easy to understand. No complex accounting rules are required for the preparation of financial statements. Second, cash accounting is closely aligned to accounting for tax purposes, and hence it is easy to translate cash accounting statements into income tax filing data. Because of these advantages, about 80 percent of all medical practices, typically the smaller ones, use cash accounting. However, cash accounting has its disadvantages, primarily the fact that in its pure form it does not present information on revenues owed to a business by payers or the business’s existing payment obligations.
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