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Accounting Methods

"Accrual vs. Cash Accounting"

Overview

The Core Concept

When does the money count?

  • Cash Basis: You record income when the cash hits the bank. (Simple).
  • Accrual Basis: You record income when the invoice is sent, even if you haven't been paid yet. (Accurate).

Why It Matters

  • Selling: Buyers want to see Accrual accounting because it shows the true health of the business.

  • Taxes: Small businesses often use Cash basis to delay paying taxes on unpaid invoices.

  • SaaS: Subscription businesses must use Accrual to handle deferred revenue.

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Convert technical theory into professional action plans

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