Basis of Accounting

Under cash basis

Under cash basis, incomes are recorded only when cash is received and expenses are recorded only when cash is paid. No adjustment is made for outstand

Under accrual basis

Under accrual basis, incomes are recorded when earned or accrued and expenses are recorded when incurred or become due, whether cash is received or pa

The matching principle means that expenses

The matching principle means that expenses should be matched with the income of the same period. Accrual basis follows this principle because it recor

True profit or loss is calculated

True profit or loss is calculated only under accrual basis because all incomes and expenses of the period are taken into consideration, not just cash

Some conservative organizations may adopt

Some conservative organizations may adopt a hybrid system, combining features of cash and accrual bases.