💰Cash basis accounting recognizes revenue and expenses based on cash transactions.
📊Accrual basis accounting recognizes revenue when earned and expenses when incurred, regardless of cash transactions.
🧾Cash basis accounting reflects the amount of cash on hand, while accrual basis accounting follows generally accepted accounting principles (GAAP).
🗓️Accrual basis accounting requires adjusting entries to ensure revenue and expenses are recognized in the proper period.
💵Cash basis accounting is commonly used by smaller businesses and sole proprietors.