Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 19 - No. 5)
What is the key difference between the accrual and cash basis of accounting?
Accrual accounting recognizes revenue when cash is received; cash basis recognizes it when earned.
Accrual accounting recognizes revenues and expenses when earned or incurred; cash basis recognizes them when cash changes hands.
Accrual accounting is only used by large companies; cash basis is used by small businesses.
Accrual accounting is more accurate than cash basis.
Explanation
Accrual accounting matches revenue with expenses in the period earned or incurred. Cash basis recognizes when cash moves.
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