Cash Basis Definition

When using this method of recordkeeping, the business owner reports income when it is actually received and expenses when they are actually paid.

Cash Basis Extended Definition
Operating under the cash method of accounting, income is recorded when payment is received from customers. This is the most commonly used method of accounting and provides the easiest system to follow.

Expenses are recorded as funds are paid to vendors. This method can be used by businesses that do not have an inventory of products available to sell.

An alternative to cash-basis accounting is accrual accounting, a method where businesses record income and expenses when the transaction takes place. A combination of accrual and cash-basis accounting is known as modified cash-basis accounting.

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Last Updated By

Christan Neff | Apr 12, 2023

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