General Accounting

What is the cash basis and accrual basis of accounting?

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    These are the two predominate bases of accounting that are used by businesses. There are some hybrids used, but all are based on these two concepts.

    The simplest method is cash accounting which recognizes income when cash is received and recognizes expense when payments are made.

    Accrual accounting recognizes income when it is earned even though the cash may not have yet been received as long as certain conditions are met. Expenses are recognized when they are owed or due which many times is prior to the actual payment event.

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