Accounting Methods:

Cash vs. Accrual

With the cash basis of accounting, income is recorded when it’s received, and expenses
are recorded as they’re paid. The cash method does not take into account any accounts
receivable or accounts payable. It strictly applies to payments from clients or sales once
you receive the cash in-hand and when an expense clears your bank account.

Accrual accounting is completely different from cash accounting. Instead of recording

income and expenses as they clear your bank, you record them as the income is
earned and the expenses are billed. The accrual method does take into account
accounts payable and receivable.