What is Cash accounting?

Cash accounting (Definition)

Cash Accounting is a procedure in which payment transactions are recorded in the actual period they were received, and expenses paid are recorded at the actual time of payment, not when the invoice was received. Using cash accounting provides a business with a clearer picture of what money the business has on hand at all times.

Here is an example of cash accounting. Your business receives an invoice from a supplier on January 14 with a 60-day payment term, you then pay the invoice on March 31, the payment is recorded on March 31. The same applies for any sales your business makes and invoices to a customer, the payment is recorded the day the customer pays you.