If you’ve ever checked your bank balance to see if you can afford dinner, you’re already using Cash Basis accounting.

How It Works

In the Cash Basis world, timing is everything—specifically, the timing of the cash itself.

• Revenue: You only record it when the cash is received.

  
  

• Expenses: You only record them when the cash is paid.

  
  

Real-World Example: If you are a forester who completes a management plan for $2,500, but the client only hands you $1,000 today, you only recognize $1,000 in revenue. It's simple for most business owners, but doesn't always show you the "big picture" of your business or what you're owed.