Question

What is the difference between the cash basis and the accrual basis of accounting?

Short answer

Cash basis is a simple system. On the other hand, the accrual basis is a complex system. On cash, a basic transaction is recorded at the time of cash settlement while on an accrual basis transaction is recorded at the time of the happening of event.

Step-by-step solution

Definition of cash basis accounting

In the cash basis accounting, only cash transactions are included. In this, non-cash transactions are ignored.

Difference between cash basis and accrual basis accounting

	Cash Basis	Accrual Basis
Nature	The nature of the cash basis is simple.	The nature of the accrual basis is complex.
Uses	Small businesses use cash basis.	Large companies use an accrual basis.
Accounting System	It follows a single-entry system.	It follows a double-entry system.
Accuracy	This accounting is less accurate.	This system is more accurate.
Recorded	Transaction is recorded at time of cash settlement.	Transaction is recorded at happening of event