Q: What’s the difference between cash basis and accrual basis — and how do I know which one my client should use? A: Cash basis records income when money is received and expenses when money is paid. It’s simple, great for freelancers, and often used by small businesses because it mirrors actual cash flow. Accrual basis records income when it’s earned and expenses when they’re incurred — even if no money has changed hands yet. This method gives a clearer picture of financial performance, is GAAP-compliant, and is required for many larger businesses. How to decide: - Use cash basis when a client wants simplicity and isn’t managing inventory or large receivables/payables. - Use accrual basis when the client needs accurate monthly financials, has inventory, or wants to understand profitability beyond cash in/out. - Some clients benefit from cash-basis tax filing but accrual-basis management reports — totally normal and very common in bookkeeping.

Modules 8 and 9 completed. What are the next steps?

Q: Why is it important to maintain accurate accounts receivable records? A: Accurate accounts receivable (A/R) records help you track who owes your business money and when payments are due. By keeping these records up to date, you can identify late payers early, follow up promptly, and maintain healthy cash flow — the lifeblood of any business. Inaccurate A/R tracking can lead to missed income, strained client relationships, or cash shortages that disrupt operations. ✨ Pro tip: Review your A/R aging report regularly — it’s your early-warning system for potential cash flow issues. Consistent attention here helps you stay proactive, not reactive, in managing your business finances.

Q: What’s the purpose of reconciling bank accounts in bookkeeping? A: Bank reconciliation ensures that your business’s financial records match the bank’s records. By comparing your ledger to your bank statement, you can spot discrepancies such as missed transactions, duplicate entries, or bank errors. Regular reconciliation not only keeps your books accurate but also protects your business from fraud and helps you maintain a clear picture of available cash. ✨ Pro tip: Reconcile every month — or even weekly if you handle a high volume of transactions. Staying current saves time during audits and gives you peace of mind knowing your financial foundation is solid.

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.