Cash-based Accounting System

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A Cash-based Accounting System is an accounting method/basis of accounting in which organizational economic transactions are recognized (on the income statement) when their corresponding cash event (increase or decrease) occurs.



References

2016

  1. Treas. Reg., 26 C.F.R. § 1.446-1(c)(1)(ii)

2014

  • http://www.investopedia.com/terms/c/cashbasis.asp
    • QUOTE: A major accounting method that recognizes revenues and expenses at the time physical cash is actually received or paid out. This contrasts to the other major accounting method, accrual accounting, which requires income to be recognized in a company's books at the time the revenue is earned (but not necessarily received) and records expenses when liabilities are incurred (but not necessarily paid for).

2013

  • http://www.accountingcoach.com/terms/C/cash-basis-of-accounting
    • QUOTE: An accounting method wherein revenues are recognized when cash is received and expenses are recognized when paid. This method is inferior to the accrual basis of accounting where revenues are recognized when they are earned and expenses are matched to revenues or the accounting period when they are incurred (rather than paid). The cash basis of accounting is usually followed by individuals and small companies, but is not in compliance with accounting's matching principle.