Journey entry on accrual and cash bases

Question

Accepted Answer

Accrual basis records revenue when earned and expenses when incurred, while cash basis records revenue when received and expenses when paid.

Accrual basis matches revenue and expenses to the time period they occur, regardless of when cash is exchanged.
Cash basis only records transactions when cash is exchanged.
Accrual basis provides a more accurate picture of a company's financial health.
Cash basis is simpler and easier to understand.
Example: Accrual basis records a sale when the product is delivered, even if payment is received later. Cash basis records the sale when payment is received.
Example: Accrual basis records an expense when a service is provided, even if payment is made later. Cash basis records the expense when payment is made.

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