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Which two accounting principles are relevant to the question

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Reference no: EM133006161

You are interviewing for the CFO role of a small start-up firm providing cloud-hosting services to your clients. The company typically signs two-year contracts, prepaid in full, with their customers. The CEO and Chairman of the Board let you know that the company has been reporting annual financial statements under Cash Accounting, but they are considering switching to Accrual Accounting. They ask you if this presents an accounting challenge.

Problem (1) Do these two-year contracts present an accounting challenge? Why or why not?

Problem (2) Which two accounting principles are relevant to this question? How so?

Reference no: EM133006161

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