What is the Difference Between Cash Accounting and Accrual Accounting?
Cash accounting and accrual accounting are two similar methods of maintaining accurate accounting records. While the two approaches share many aspects in common, there are two key differences that distinguish each method from the other. Essentially, the difference between cash accounting and accrual accounting boils down to the way debits and credits are applied in the bookkeeping process. To understand the difference, it is first necessary to define each type of accounting process. Cash accounting, which is also known as cash basis accounting, allows for the recognition of income at the time it is actually received. This means that invoiced income is not counted as an asset until payment for the invoice is actually in hand. The same approach is applied to debits, in that any expenses incurred are not posted until they are paid. In contrast, accrual accounting does recognize income at the time it is earned. As goods or services are invoiced, the invoices are posted and counted as asset
Cash accounting and accrual accounting are two similar methods of maintaining accurate accounting records. While the two approaches share many aspects in common, there are two key differences that distinguish each method from the other. Essentially, the difference between cash accounting and accrual accounting boils down to the way debits and credits are applied in the bookkeeping process. To understand the difference, it is first necessary to define each type of accounting process. Cash accounting, which is also known as cash basis accounting, allows for the recognition of income at the time it is actually received. This means that invoiced income is not counted as an asset until payment for the invoice is actually in hand. The same approach is applied to debits, in that any expenses incurred are not posted until they are paid.
Cash accounting and accrual accounting are two similar methods of maintaining accurate accounting records. While the two approaches share many aspects in common, there are two key differences that distinguish each method from the other. Essentially, the difference between cash accounting and accrual accounting boils down to the way debits and credits are applied in the bookkeeping process. To understand the difference, it is first necessary to define each type of accounting process. Cash accounting, which is also known as cash basis accounting, allows for the recognition of income at the time it is actually received. This means that invoiced income is not counted as an asset until payment for the invoice is actually in hand. The same approach is applied to debits, in that any expenses incurred are not posted until they are paid. In contrast, accrual accounting does recognize income at the time it is earned. As goods or services are invoiced, the invoices are posted and counted as asset
