Accrual Basis Accounting versus Cash Basis Accounting
The difference between the two types of accounting is the moment when revenues and expenses are recorded:
- In cash basis accounting
, revenues are recorded when cash is actually received and expenses are recorded when they are actually paid (no matter when they were actually invoiced).
- In accordance with accounting principals, accrual basis accounting
is the method of accounting most businesses and professionals are required to use. Accrual accounting method gives the most accurate picture of the financial statements for the company.