Cash-based Accounting System

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.

• AKA: Cash Method of Accounting, Cash-Basis, Cash Accounting.
  • …
• Counter-Example(s):
  • an Accrual Method of Accounting.
• See: Fund-based Method of Accounting, Generally Accepted Accounting Principles, Zero-based Budgeting.

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References

2016

• (Wikipedia, 2016) ⇒ http://en.wikipedia.org/wiki/Cash_method_of_accounting Retrieved:2016-1-13.
  • The cash method of accounting, also known as cash-basis accounting, cash receipts and disbursements method of accounting or cash accounting (the EU VAT directive vocabulary Article 226) records revenue when cash is received, and expenses when they are paid in cash. As a basis of accounting, this is in contrast to the alternative accrual method which records income items when they are earned and records deductions when expenses are incurred regardless of the flow of cash.

• (City Council of Barnstable, 2016b) ⇒ Town of Barnstable. (2016). “Town of Barnstable Adopted Operating Budget - 2017."
  • QUOTE: Cash basis of accounting: An accounting method used that records and recognizes revenues when cash is received and expenses when cash is paid out of the Town treasury.

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.

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