O'Reilly logo

The Finance Book by Si Hussain, Stuart Warner

Stay ahead with the world's most comprehensive technology and business learning platform.

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, tutorials, and more.

Start Free Trial

No credit card required

2 Cash versus accruals accounting

‘Remember that credit is money.’

Benjamin Franklin, American statesman, diplomat, writer, scientist and inventor.

In a nutshell

‘Cash accounting’ simply records inflows and outflows of cash, into and out of a business. Income is recognised only when cash is ‘received’ and expenses are recognised only when cash is ‘paid’. This risks understating or overstating a business’s net worth.

Instead, the vast majority of businesses and all companies prepare their accounts on what is known as the ‘accruals’ or ‘matching’ basis.

‘Accruals accounting’ acknowledges the timing differences inherent in and arising from business transactions. Income and expenses should be ‘matched’ to the correct period. Financial transactions ...

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, interactive tutorials, and more.

Start Free Trial

No credit card required