What is the meaning of Cash Accounting?

Cash accounting is a process of accounting where the recording of receipts is done when they are received and the expenses are recorded when the money is actually paid. Thus, transactions are recorded when they take place in practice. It is more useful for small companies and businesses involved in the service sector as it is relatively easy when compared to accrual accounting. It also gives an explicit picture of the actual amount of money with the company at any specific point in time. On the flip side, cash accounting does not reflect the liabilities of the company which are present but not yet paid for.



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