Cash Basis Accounting

Beginner 💰 Finance / Accounting

Definition

Recording transactions only when money physically moves, making bookkeeping simpler but reality more confusing.

Example Usage

Using cash basis, we look profitable because we haven't paid our suppliers yet.

Origin

The oldest accounting method, predating accrual accounting by centuries

Fun Fact

Most small businesses use cash basis because it's simpler, but it violates GAAP standards

Source: Fundamental accounting method

Related Terms

Advanced

subordinated

In finance, debt or claims that get paid last in the hierarchy of bankruptcy proceedings—basically the financial equivalent of standing at the back of the line. Subordinated debt holders only get paid after senior creditors are satisfied, making it riskier but typically offering higher returns. It's the 'you'll get yours if there's anything left' category of obligations.

💰 Finance / Accounting
Beginner

creditor

The person or institution you owe money to, who will periodically remind you of this fact with varying degrees of politeness. In the great financial food chain, creditors sit above debtors and pray they'll actually get paid back. They range from your friendly neighborhood bank to that guy you borrowed twenty bucks from in college and somehow never repaid.

💰 Finance / Accounting
Advanced

GAAP (Generally Accepted Accounting Principles)

A standardized set of accounting rules that ensure financial statements are consistently misleading across all companies. Compliance theater for balance sheets.

💰 Finance / Accounting
Intermediate

underwriting

The mystical process where financial institutions assess risk and decide whether to give you money, usually involving algorithms, credit scores, and prayers to the profit gods. Investment banks use it to evaluate securities before offering them to investors, while insurance companies use it to determine if you're worth the gamble. It's essentially professional betting on whether you'll pay your bills or file a claim.

💰 Finance / Accounting
Beginner

book value

An asset's value on the balance sheet after accounting for depreciation and amortization—basically what the accountants say it's worth, which often bears no resemblance to what someone would actually pay for it.

💰 Finance / Accounting
Intermediate

comply

To follow the rules without complaining—like a well-trained corporate puppet. The art of yielding assent and adapting yourself to conform with requirements, usually while internally screaming.

💰 Finance / Accounting

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