![]() ![]() Generally speaking, accrual accounting is better for larger, more established businesses. Same goes for expenses, which you record when you’re billed in the form of accounts payable. Using the accrual accounting method, you record income when you bill your customers, in the form of accounts receivable (even if they don’t pay you for a few months). Many small businesses opt for the cash basis of accounting because it’s easy to maintain, doesn’t require you to track receivables or payables, and tells you exactly how much cash you have on hand at any given point in time. If you bill a customer today, those dollars don’t enter your ledger until the money hits your bank account. Under cash accounting, you record transactions only once money has exchanged hands. You have another important decision to make when setting up your bookkeeping: whether to make your accounting process cash or accrual based. ![]()
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