What is the difference between cash basis and accrual accounting?

Cash basis lets businesses record income and expenses only when cash is actually received or paid. Accrual accounting involves tracking income and expenses as they are incurred (when an invoice is sent or a bill received) instead of when money actually changes hands.

Are cash and accrual accounting the same?

Cash and accrual accounting are like sibling rivals in the accounting realm—one clashes with the other, but you can definitely see the resemblance. Even if you don’t handle your own financial reporting, it’s vital to know how each one works so you can choose the best bookkeeping practices for your business.

What is accrual basis accounting?

Accrual basis accounting records income and expenses when they’re incurred, regardless of whether money has been exchanged yet. Accrual basis accounting is typically best because it offers the most accurate information about your business’s performance. But its complexity may outweigh its benefits for simple, very small businesses.