An accounting method in which revenues and expenses are recognized and recorded only when cash is received or paid.
Cash basis is an accounting method used by small businesses to record revenue and expenses based on actual cash inflows and outflows. Under this approach, revenue is recognized when it is received in cash, and expenses are recorded when they are paid in cash. This method provides a simplified way of tracking cash flow and is suitable for small businesses with straightforward transactions. By using the cash basis, small business owners can easily monitor their cash position, make day-to-day financial decisions, and manage their cash flow effectively.