Financial Matters for Healthcare Professionals In other words, the availability of money is not only dependent on the earning of the Income but more so on the manner in which the earned income is accounted for. Classification : The classification takes the form in a separate book called a Summarizing : Summarizing takes in the form of trial balance, trading account, So with the four steps clarified, the next stage is how the three types of accounting practices are made in an account entry. The three types are cash flow, accrual, and fund accounting. For cash accounting inventory, that is based on when you receive the cash for sales. Accrual relies on when the customer orders the inventory from you, even if they have not paid yet, they are obligated by law to send the money so the purchase will be recognized. Fund accounting inventory should work similar to accrual accounting but some funds recognize the most recent assets and ignore the long-term. Funds usually will not have inventory, because normally the businesses do. The one important lesson that every business will learn is that if your accounting has been done correctly, the numbers (past and present) of the company will show the strengths and weaknesses of the cycle. Accounting is a picture of your financial health and your future. References: Introduction to Accounting. Retrieved December 21, 2008, from Accounting Web site: http://www.b-u.ac.in/sde_book/bcom_prince.pdf (2004-2007). Simple Studies. Retrieved December 21, 2008, from Accounting for Accruals Web site: http://www.simplestudies.com/accounting/lec/p0201.htm