What is the difference between Cash Basis vs. Accrual Basis financial statements?

What is the difference between Cash Basis vs. Accrual Basis financial statements?

What is the difference between Cash Basis vs. Accrual Basis financial statements?
As you may know "Cash Basis" is exactly what it says it is. You don't record in your accounts until the cash comes in. For example, if you have sold something and NOT received cash for it, then it is on account. In cash basis, you would not record it in your accounts until you receive the money. In "accrual basis" you would still record it because it has "accrued" or taken place. This rule is in place for various financial transactions such as depreciation as well. Remember when you set up you books you must select one method or the other and stick with it. "Accrual" seems to work better for large inventory or manufacturing type businesses. "Cash Bases" seems to work for smaller service type businesses.





Good luck in you quest.