Cash Accounting

Cash accounting or cash basis accounting is accounting method that record transactions as expenses or revenues when the corporations receive the payment or make the the payment. Unlike accrual accounting that records transactions when the transactions occur, cash accounting or cash basis accounting recognize expenses and revenues on they payment date instead of transaction date. Investors need to take note that payment date and transaction date can be different date on accounting. For instance, if a customer bought a computer from corporation XYZ, the date that the customer order the computer from corporation XYZ is transaction date. For cash accounting or cash basis accounting, the order is not reflected as revenue in the account yet. One week later, on the date of delivery, the customer paid cash to corporation XYZ. This date is payment date and it will be recognized as revenue in account book on payment date for cash accounting or cash basis accounting.