What is the difference between cash and accrual accounting?
I run a small service business and am not sure which method my books should follow.
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Aicountly Accounting Guide
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Under cash accounting, income and expenses are recorded when money is received or paid. Under accrual accounting, they are recorded when they are earned or incurred, regardless of when cash moves.
For example, if you raise an invoice in March and the customer pays in April, accrual books show the income in March, while cash books show it in April.
Companies must follow the accrual basis, and many other businesses are also required to follow it under the Income-tax Act, so most small businesses keep accrual books. Check with your CA which method applies to you.
Aicountly Accounting Guide · Oct 17, 2026
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