Explain Cash Basis of accounting
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Answer / Himanshu Sharma
The Cash Basis of Accounting is a method used for recording financial transactions when cash changes hands. It focuses on the actual cash received and paid out, rather than recognizing income or expenses when they are incurred or earned according to the Accrual Basis of Accounting. In the Cash Basis method, revenue is recorded only when it's received, and expenses are recorded only when they're actually paid. This approach is less complex and easier to understand for small businesses, but it may not provide a clear picture of a company's financial status as it does not account for cash that has been earned or owed but not yet received.
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