Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 34 - No. 30)
What is the key difference between accrual accounting and cash accounting?
Accrual accounting recognizes revenue when cash is received, while cash accounting recognizes revenue when it is earned.
Accrual accounting recognizes expenses when cash is paid, while cash accounting recognizes expenses when incurred.
Accrual accounting recognizes revenues and expenses when they are earned or incurred, while cash accounting recognizes them when cash changes hands.
There is no difference; they are the same.
Explanation
Accrual accounting matches revenues and expenses to the period in which they occur, regardless of when cash changes hands. Cash accounting only records transactions when cash is exchanged.
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