Difference between revisions of "Cash accounting"
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Under cash accounting, [[revenue]]s are recorded on the accounting records when payment is received under [[cash accounting]]. Similarly, [[expense]]s and [[liability|liabilities]] are recorded when payment is made. | Under cash accounting, [[revenue]]s are recorded on the accounting records when payment is received under [[cash accounting]]. Similarly, [[expense]]s and [[liability|liabilities]] are recorded when payment is made. | ||
| − | A hybrid form of cash accounting, called '''modified cash accounting''', is used in many cases. It generally works the same as cash accounting except for | + | A hybrid form of cash accounting, called '''modified cash accounting''' (also called '''modified accrual accounting'''), is used in many cases. It generally works the same as cash accounting except for two major areas: long-term assets are capitalized and subject to [[depreciation]] or [[amortization]], and long-term liabilities are recorded as debt and reduced as payments are made. |
[[Category:Accounting]] | [[Category:Accounting]] | ||
Revision as of 20:21, February 24, 2018
Cash accounting is a method of accounting which is used in many small businesses. Companies that are publicly-traded or subject to government regulation, however, cannot use cash accounting; they are required to use accrual accounting.
Under cash accounting, revenues are recorded on the accounting records when payment is received under cash accounting. Similarly, expenses and liabilities are recorded when payment is made.
A hybrid form of cash accounting, called modified cash accounting (also called modified accrual accounting), is used in many cases. It generally works the same as cash accounting except for two major areas: long-term assets are capitalized and subject to depreciation or amortization, and long-term liabilities are recorded as debt and reduced as payments are made.