Cash Vs Accrual Accounting: What Are The Key Differences?

Cash accounting recognizes revenue and expenses when cash is received or paid, while accrual accounting records them when transactions occur.

Accrual accounting offers a more comprehensive view of a company's financial health by including accounts payable and receivable.

Small Businesses

Cash accounting is simpler and suits small businesses, but it may overstate a company's financial well-being by not considering accounts payable.

The accrual method is commonly used by publicly traded businesses, providing a more even representation of earnings over time.

Businesses must carefully consider the advantages and disadvantages of cash and accrual accounting methods when making financial decisions.