Cash Basis Accounting

Cash basis accounting is a method of recording financial transactions where income and expenses are recognized only when cash is actually received or paid. This means that revenue is recorded when money comes in, and expenses are logged when money goes out. This approach is often used by small businesses and individuals due to its simplicity and straightforwardness. Unlike accrual accounting, which records revenues and expenses when they are incurred regardless of cash flow, cash basis provides a clearer picture of cash on hand, making it easier to manage day-to-day finances.