Cash vs. Accrual Accounting
Recording transactions when cash moves versus when they are earned or incurred.
What is Cash vs. Accrual Accounting?
Cash-basis accounting records revenue when cash is received and expenses when cash is paid. Accrual accounting records revenue when earned and expenses when incurred, regardless of when cash changes hands. GAAP requires accrual accounting for public companies, because it matches revenue to the period that produced it.
Cash vs. Accrual Accounting: a worked example
A December sale paid in January is December revenue under accrual accounting, January revenue under cash accounting.
More terms in Economics & Financial Reporting
Business Cycle
The recurring pattern of expansion, peak, contraction, and trough.
Leading, Coincident & Lagging Indicators
Data series that move before, with, or after the business cycle.
Deflation vs. Disinflation
Falling prices versus a slowing rate of price increases.
Currency Valuation & Exchange Rates
What one currency buys of another, and who wins when it moves.
Sovereign Debt
Bonds issued by a national government.
Trade Deficit
A country imports more goods and services than it exports.
Income Statement
Revenue, expenses, and profit over a period of time.
Balance Sheet
Assets, liabilities, and equity at a single point in time.