Accrual vs. Cash basis method of tax accounting - difference

What is the difference between Accrual and Cash method of tax accounting ? Which one is better ?
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07 Jan 2023 at 01:34 PM
The main difference between Cash and Accrual basis accounting is in the timing of when revenue and expenses are recognized.

Explanation:

Cash basis accounting generally recognizes revenue and expenses exactly when you receive or spend the money.

Accrual basis accounting is a method in which revenue and expenses "happen" earlier. In accrual accounting, revenue is recorded when it is earned and expenses are recorded when they are incurred.

For example:

In accrual accounting, revenue is recorded when you create an invoice (even without receiving of cash). Income is taxed even if cash has not been received.

Cash basis accounting is more simple, because income is taxed only when cash has been received.
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14 Jan 2023 at 11:14 AM
Ben
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