What’s the difference between Accrual Accounting and Cash-Based Accounting?


Accrual accounting and cash-based accounting are two different accounting methods used to track financial transactions.

Accrual accounting is based on the idea that revenue should be recognized when it is earned, regardless of whether or not it has been received in cash. This method typically involves recording expenses as they are incurred, rather than waiting until they are paid. The main advantage of this accounting method is that it provides a more accurate picture of a company’s financial position.

Cash-based accounting, on the other hand, focuses on cash flow rather than revenue recognition and expense tracking. This accounting method is less common, but is often used by small businesses or startups that have limited cash reserves and need to track their finances in a more straightforward manner. Under this method, income and expenses are only recognized when cash is actually exchanged. The main advantage of this accounting method is that it is simpler to manage.

While both accounting methods have their pros and cons, it is important to choose the accounting method that best suits your business needs and accounting goals. Whether you choose accrual accounting or cash-based accounting, it is crucial to keep accurate records of your financial transactions in order to run your business more effectively. Coastal Bookkeeping & Mobile Notary Services can help you with this! Contact us today to discuss the best accounting method for your business.

Don’t waste any more time getting lost in your books. Getting started is easy. Reach out today to find out how Coastal Bookkeeping & Notary Services can help at 321-243-7513.