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Cash vs accrual—what’s the difference and which should I use?
Cash recognizes revenue/expenses when money moves; accrual recognizes when earned/incurred. Accrual shows truer performance.
Cash basis books when cash hits/leaves the bank. Accrual books when revenue is earned and expenses incurred, matching costs to the period of benefit. Accrual is preferred if you invoice, carry inventory, or want financing because it shows AR/AP and margins accurately. Some firms manage on accrual and convert to tax basis annually.
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