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in one word , the (( Time )) when recoding the transactions and the status of it as well.
Accrual Base: care about the current financial position (How much is our assets & How much our liabilities in a specific time).
Cash Base : care about Money that we have now (in , out and balance Cash) , without caring about the our liabilities or the money that we have as prepare but doesn’t belong to us.
The difference between cash and accrual basis accounting has to do with the time frame in which revenues and expenses are recorded and reported. Cash basis accounting will suffice if your business is a simple one. However, the accrual basis will give a more accurate picture of the results of business operations.
Under the accrual:1. Revenues are reported on the income statement when they are earned which often occurs before the cash is received from the customers.2. Expenses are reported on the income statement in the period when they occur or when they expire which is often in a period different from when the payment is made.
Under the cash basis:1. Revenues are reported on the income statement in the period in which the cash is received from customers.2. Expenses are reported on the income statement when the cash is paid out.
The difference between the two is the timing of the recognition of the transaction.
In accrual method, the transaction is recognized at the time of occurrence while in cash basis, the transaction is recognized once there is inflow/outflow of cash.
The difference between these two is the timing. In accrual, you recognize income and expenses as it happens, regardless of when you receive and paid cash. Cash basis is self explanatory, income and expenses is recorded upon receiving and spending cash.
