What is a Cash Basis?
The cash basis is a method of bookkeeping that focuses on the inflow of cash received and the outflow of cash paid in order to settle short-term obligations. A cash basis of accounting does not address the issue of debts that are paid in some manner other than the actual cash disbursement. While few businesses operate on a strictly cash basis today, the method has proven effective for companies that are attempting to recover from bankruptcy. The cash basis process differs from the standard accrual basis mode of accounting that is more commonly employed today. With accrual based accounting procedures, the focus is on recording any type of revenue receipt, not just cash receipts. Also, the outflow of payments may be in a form other than cash and be recorded in an accrual. Accrual often includes such factors as sales that are made and accepted on accounts established for the use of a customer, as well as invoices that are connected to shipments made to clients that feature extended paymen
