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Accounting Method

Your business might be using the cash accounting method or the accrual accounting method.

Cash accounting method

Cash accounting is how much money is coming and going out of your business. Cash accounting reflects when cash changes hands.

For example, if you create an invoice on Tuesday, and the customer pays on Friday, you record that income on Friday’s income in your books.

Accrual accounting method

Accrual accounting is the opposite of cash accounting, so you record income when the invoice is created. Accrual accounting reflects when you make a sale.

For example, if you create an invoice on Tuesday, and the customer pays on Friday, you record that income on Tuesday’s income in your books.

If you use accrual accounting, you record expenses and sales when they take place, instead of when cash changes hands.

Tax Implications

As with anything accounting, you will need to check with your accountant, as your tax requirements may differ depending on your accounting method.

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