Cash Basis vs Accrual Basis Accounting Distinctions

Cash basis records income when received and expenses when paid, while accrual basis records income and expenses when earned or incurred.

Cash basis accounting focuses on actual cash flow, making it simpler and easier to understand for small businesses.

Accrual basis accounting provides a more accurate representation of a company's finances by including accounts receivable and accounts payable.

<p>Cash basis accounting recognizes income when received and expenses when paid.</p> Signup and view all the answers

<p>Accrual basis accounting recognizes income and expenses when they are earned or incurred, regardless of when cash is received or paid.</p> Signup and view all the answers

<p>Accrual accounting is more intricate as it includes accounts receivable and payable, providing a more detailed financial overview.</p> Signup and view all the answers