Definition
The fundamental method used to determine when transactions are recorded—either when cash moves (cash basis) or when obligations occur (accrual basis). Like choosing whether to count calories when you eat or when you order.
Example Usage
We switched from cash basis to accrual basis accounting to better match revenues with related expenses and satisfy investor requirements.
Origin
Fundamental accounting concept distinguishing timing of transaction recognition.
Fun Fact
Most small businesses start on cash basis for simplicity, but companies seeking investment or going public must use accrual basis.
Source: GAAP fundamental principles
Related Terms
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See “basis of accounting” in Corporate Speak, Gen-Z Slang, Pirate Speak, and more.
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