Cash Accounting

Cash accounting is a method of tracking financial transactions where income is recorded when received and expenses are recorded when paid. It reflects the actual cash flow in and out of a business, providing a straightforward view of available cash at any moment. This approach is often used by small businesses because of its simplicity and immediate insight into cash position, though it may not fully capture long-term liabilities or receivables. Unlike accrual accounting, which records transactions when they occur regardless of payment, cash accounting focuses solely on actual cash movement.