Cash basis v. Accrual: The cash basis method of accounting recognizes transactions only when cash or equivalents have been exchanged. Accrual basis follows the matching principle and records (recognizes) transactions as they occur

  • Only accrual basis accounting is an acceptable method under Generally Accepted Accounting Principles US
  • Cash basis records revenue and expenses only when cash or equivalents have been exchanged
  • Accrual basis records revenue when earned and realizable and expenses as incurred, even if cash has not been paid

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