cash method

Cash Basis Accounting

A system of accounting that recognizes revenue in the order in which it is received, and expenses on the same basis. Cash basis accounting does not deal with accounts receivable or accounts payable and only recognizes transactions actually paid for. This accounting system is easiest and perhaps best for organizations with few or no credit sales. See also: Accrual Accounting Convention.

cash method

An accounting method employed by individuals for preparation of their taxes,and often used by small businesses.Income is counted when the money is actually received by the taxpayer,and expenses are counted during the period in which they are actually paid.Contrast with the accrual method, in which income is counted when it is earned, whether or not it results in money during that period, and expenses are counted when they are incurred, regardless of when they are actually paid.Cash method accounting can dramatically skew financial statements,making properties appear profitable solely as a result of holding bills and not paying them until another period.