cash ratio.Explain accrual accounting with examples

If you’re an entrepreneur or small business owner, it’s a good idea to familiarize yourself with cash and accrual accounting methods.

What is the cash accounting method?

So, what is the difference between the cash accounting method and the accrual accounting method? According to the IRS, the cash and accrual accounting method is one of the most common accounting methods.

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


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