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Accrual vs. Cash Basis Accounting
Accrual vs. Cash Basis Accounting
Ben Quagliani avatar
Written by Ben Quagliani
Updated over a week ago

In MyCase you will have the option to assess your firm's financial health in a number of ways. It is important to understand the difference between accrual and cash basis accounting in order to make the correct decision for your firm. The main difference between accrual and cash basis accounting lies in the timing of when revenue and expenses are recognized. The Cash Basis method recognizes revenue and expenses more immediately, while the Accrual Basis method focuses on anticipated revenue and expenses.

Accrual Basis

Accrual Basis is the method of accounting that recognizes revenue on the income statement when it is earned, rather than when the cash is received. This method of accounting will allow you to have a better picture of your expenses. The expenses are reported on the income statement in the period that connects with related revenues, which can be different than the period in which the payment is made.
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Accrual Accounting will give your firm a better understanding of your business' financial health at the end of the year, as all of your earned assets and liabilities will be shown on the balance sheet.

Cash Basis

Cash Basis is the method of accounting that only recognizes revenues and expenses on the income statement when the cash is actually received or paid out. The key advantage of the Cash Basis method is its simplicity, making it easier to track your business' cash flow.
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​For example, let's say your firm agrees to retain a client, so you bill them for their consultation fee. If the fee is $300, under the cash method, that amount is not recognized in the books until the customer transfers funds to you for payment. Under the accrual method, the $300 is recognized as revenue immediately when the client is retained and invoiced, even if you receive the funds a few days or weeks later.

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