CASH BASIS ACCOUNTING

Cash-basis accounting is a system in which revenues and expenses are acknowledged when cash is actually received or paid, instead of when the work is completed or goods are delivered. This implies that transactions are documented in real-time as they happen. Below are some essential points about cash-basis accounting:

• Does not have accounts payable or accounts receivable

• Everything is recorded when it happens

• Cannot be used if you offer credit or have inventory

Because of its simplicity, cash-basis accounting is a favorite of small businesses. However, because you aren't tracking future transactions, it doesn't always give a full picture of income and expenses; it's more of a snapshot of the business activity. NOTE: If your bookkeeper is not providing accounts payable, accounts receivable, or full inventory tracking in your current accounting program, it could be that your current services only include CASH BASIS reporting. You may need to request an upgrade or additional add-on services in order to get these insights (learn more about ACCRUAL BASIS accounting below).