These subjects, cash and accrual accounting, are very different from each other. In this essay, I will say in what way that they are different. The cash method is a more immediate recognition of revenue and expenses. The accrual method focuses on anticipated revenue and expenses.

The cash method is when you have a notebook or a folder or anything that you keep track of stuff in and you write down when you received cash, how much cash you received, etc. You also write down when you send out cash, how much cash you send out, etc. It’s pretty simple. According to Accounting Made Simple by Mike Piper, “The problem with the cash method, however, is that it doesn’t always reflect the economic reality of a situation.” This method is used mostly by businesses that are small and for personal finances.

“The accrual method records revenue when a product or service is delivered to a customer with the expectation that money will be paid in the future.” according to Investopedia. So the accrual method (with a lot of descriptiveness) records money generated from normal business operations when a system supplying a public need is delivered to the person who needs it with the expectation that money will be paid later on in the future. The problem with this method is that it does not track cash flow.

If you are starting a business than I suggest that you use the cash method. As your business grows than you should change to the accrual method. Maybe you can even use both methods at the same time!