Many people do not understand the concept of accrual accounting and how it differs from accounting on a cash basis. In particular, they are confused as to why a company's results in any one accounting period can differ so much between the two methods of accounting. Because the cash basis is understood to a far larger degree, many people argue that the cash basis should be the primary basis of accounting.

Required 

Write a short memorandum that explains the difference between accrual accounting and the cash basis of accounting. In your memo give a simple example of how the accrual basis can give a clearer picture of a company's performance in a given period.