What is the difference between cash and accrual accounting?

Cash accounting records income when money arrives and expenses when they are paid. Accrual accounting records income when it is earned and expenses when they are incurred, even if no cash has moved. Most small businesses can use the cash method for taxes, while accrual gives a truer picture of profitability.

Answered by Dushyant Hirwani · Updated November 3, 2026