What is the difference between cash basis and accrual basis accounting?

Oct 27 • Q & A

Q: What is the difference between cash basis and accrual basis accounting?

A: The cash basis method records income when cash is received and expenses when they’re paid. It’s simple and gives a clear view of cash flow — perfect for small businesses focused on day-to-day liquidity.

The accrual basis, however, records income when it’s earned and expenses when they’re incurred, regardless of when money changes hands. This method provides a more accurate picture of long-term profitability and financial position.

✨ Pro tip: If you want a true understanding of how your business is performing — especially if you handle invoices or credit sales — accrual accounting gives deeper insight for smarter decision-making.

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