What is Accrual Basis Accounting vs. Cash Based Accounting?
Accrual Basis Accounting
Accrual basis accounting refers to a major accounting method that recognizes revenues and expenses at the time a transaction occurs, regardless of when cash is exchanged. Accountants using this method record financial transactions as soon as the invoices are sent/received and money is pledged. Accrual basis accounting is generally considered the standard accounting practice among most organizations. In contrast to cash basis accounting, accrual basis accounting is often viewed as a more accurate portrayal of your financial activity as it includes services provided or received that have not yet been paid for.
Cash Basis Accounting
Cash basis accounting refers to a major accounting method that recognizes revenues and expenses at the time cash is received or paid out. Accountants using this method record financial transactions as soon as invoices are paid or cash is deposited. Because cash basis accounting records transactions only at the point cash is exchanged, this is often viewed as a less accurate method of accounting. However, small organizations that do not carry inventory might use this method, as it provides a picture of cash available on hand and is generally a simpler and less expensive method of accounting. Cash basis accounting is in contrast to accrual basis accounting.
NEXTSTEPS | 11.16.20
Latest Blog Posts
Should My Dancers Be on Payroll?
Should My Dancers Be on Payroll?Legal Implications of Payroll Employees From the perspective of the New York Department of Labor, if you are a dance company and are dictating when and where your dancers are performing their services, those individuals are considered...
What is a Sole Proprietor?
What is a Sole Proprietor?Definition of Sole Proprietor for Those in the Performing Arts A Sole Proprietor is an entity that is not incorporated (as a C-corp, S-corp, or other corporate structure). This includes performing arts entities. As the name implies, sole...
Tips for Obtaining Institutional Funding
Tips for Obtaining Institutional FundingDevelopment & Fundraising through Institutional Funding Everyone needs money, and if you are an artist, nonprofit, or dance organization, a good chunk of your income is probably raised through fundraising. In the nonprofit...