Cash Accounting and Accrual Accounting IN ACCOUNTS.

Transcript

00:00Cash or accrual which accounting method should you care about? Let's find out so cash basis of accounting

00:06It's pretty straightforward. You record transactions only when cash is actually received or paid

00:12For example, you count revenue when you get the money and expenses when you pay them no cash

00:17No record simple, right? This method is often used by nonprofits like clubs and schools

00:23Now on to the accrual basis of accounting here income is recorded when it's earned

00:29Not when you get the money same goes for expenses, they're recorded when incurred even if you haven't paid yet

00:36Imagine you sold something on credit. It's still recorded as a sale haven't paid March's rent yet doesn't matter

00:42It's still an expense. By the way, companies are required by law to use accrual accounting

00:47Why because it gives a truer picture of financial health want more accounting tips subscribe to accounting by Sonia Satya

00:54Thanks for watching