{"id":203643,"date":"2021-07-19T08:25:31","date_gmt":"2021-07-19T15:25:31","guid":{"rendered":"https:\/\/www.nationalfunding.com\/blog\/?p=203643"},"modified":"2021-07-22T09:12:24","modified_gmt":"2021-07-22T16:12:24","slug":"accrual-vs-cash-basis-accounting-explained","status":"publish","type":"post","link":"https:\/\/www.nationalfunding.com\/blog\/accrual-vs-cash-basis-accounting-explained\/","title":{"rendered":"Accrual vs. Cash Basis Accounting Explained"},"content":{"rendered":"

Every business owner needs an accounting method for recording and reporting their business’s income and expenses. In most cases, the choice often comes down to accrual vs. cash basis accounting.<\/p>\n

Here’s a rundown on these top two accounting methods for small businesses.<\/p>\n

Cash Basis Accounting<\/h2>\n

Let’s start with the simpler option. Cash basis accounting more immediately recognizes income when it’s received and expenses when they’re paid. It works almost like a personal checking account. Money comes in, you have it. Money goes out, you don’t. You always have a clear picture of your current business funds.<\/p>\n

Accrual Accounting<\/h2>\n

Alternatively, the accrual accounting method revolves more around anticipated<\/em> revenue and expenses. With this method, it doesn’t matter if you’ve actually received or paid any money \u2014 the transaction is still put on the books.<\/p>\n

Here’s an accrual accounting example for both incoming and outcoming funds:<\/p>\n