Account 1 Marks Question

Under this basis, incomes are recorded when they are earned or accrued, irrespective of the fact whether cash is received or not, e.g., sales made on credit will be included in the total sales of the period. Similarly, expenses are recorded when they are incurred or become due and not when the cash is paid for them.

Yes. It does not follow matching principle and accrual concept.

Accrual basis of Accounting.

Cash basis of accounting.

1. It discloses true profit or loss for a particular period.
2. It follows the matching principle of accounting.

Under this basis, incomes are not recorded unless they are received in cash. Similarly, expenses are recorded only when they are paid in cash.

Basis of Distinction	Cash Basis of Accounting	Accrual Basis of Accounting
Timing of Recording of incomes	As per this basis, only those incomes recorded which have been received in cash.	As per this basis, all incomes are recorded whether cash is received for them or not.