Cash Vs. Accrual Accounting Explained With Examples


If you are an entrepreneur or small business owner, it is a good idea to familiarize yourself with both the cash and accrual accounting methods.

What is Cash Accounting Method?

So, what’s the difference between cash and accrual accounting methods? Cash and accrual accounting methods are among the most common methods of accounting, according to the IRS.

The IRS Publication 538 (01/2022), Accounting Periods and Methods breaks down the two methods. First, the cash accounting method is when money flows in or out of a company and the transaction is when the cash is reported in the same year, while the expenses can be reported in the tax year that it is spent.