On what basis of accounting are the financial statements for Clean Your Dirty Face prepared?

According to the 2025 FDD, Clean Your Dirty Face prepares its financial statements on the accrual basis of accounting, following accounting principles generally accepted in the United States of America. This means that Clean Your Dirty Face recognizes revenue when it is earned and expenses when goods or services are received, regardless of when cash changes hands. However, for income tax reporting, Clean Your Dirty Face uses the cash basis of accounting.

The accrual method provides a more accurate picture of a company's financial performance over time compared to the cash method. It matches revenues with the expenses incurred to generate those revenues in the same period. This is a standard practice for most established businesses, as it gives a more realistic view of profitability and financial health.

For a prospective Clean Your Dirty Face franchisee, understanding the difference between accrual and cash basis accounting is important. While the franchise's financial statements are prepared using the accrual method, franchisees may have the option to use the cash method for their own tax reporting, depending on their specific circumstances and business structure. Consulting with a financial advisor is crucial to determine the most appropriate accounting method for their individual franchise operations.