What is the Definition of Cash Basis Accounting?

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


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