Cash basis
Financial Accounting glossary · The Accounting Cycle & Financial Statements
Definition
Basis under which revenues are recognized when cash is received and expenses when paid; not GAAP-compliant for most entities.
Cash basis in plain English
Cash basis just means you count money only when it actually moves — you record income the moment cash lands in your hand, and you record a cost the moment cash leaves. Think of your allowance: you "earned" $20 the day it hit your pocket, not the day you did the chores. It's simple and matches your bank balance, but it can paint a misleading picture — if a customer owes you $5,000 for work you already finished, cash basis pretends that money doesn't exist yet. That's why the official rulebook (GAAP) won't let most real companies use it.
Practice Cash basis
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