Cash-basis accounting records money in and out when it moves. Accrual-basis records revenue when earned and expenses when incurred, regardless of payment. The timing difference matters for how your books look.
This week we're talking about the accrual basis versus cash basis and what they are. And when these things come up, when they come into play, is essentially we're talking about when you're recording a transaction in your books, right? So cash basis says we're not going to record an expense until we're physically paying a bill, we're sending a check out, something like that. We're not going to record the revenue until we've actually been paid by the client. The accrual basis says we're going to record the transaction when we we've earned the money, right? We've done the work, we've sold the product, even whether or not we've gotten paid on it, we've earned it. Or we're going to record the expense when we've incurred it, okay? So somebody does something for us, we haven't received an invoice yet, or we have received an invoice but we haven't paid it yet, we're going to record that expense at the time that it— the expense is incurred, not necessarily when it was paid. So that's the big— the 2 big differences between cash basis and accrual basis. If you have questions about it, reach out to us, reach out to your accountant, they should be able to explain it. Talk soon.
Estimated Payments.. What are they? Why you should care. #construction #trades #taxes
