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Accounting & Tax vocabulary · Bookkeeping & Ledgers

Cash basis

Meaning in accounting & tax, with examples

nounCommon term

In accounting & tax, cash basis means: A method of accounting that records income only when money is received and expenses only when they are paid, rather than when they are earned or incurred.

In Turkish: nakit esası, tahsil esası

How it is used

Simple and used by some small businesses and freelancers, but most companies must use the accrual basis. Accountants often compare the two when explaining why profit and cash are different.

Example sentences

  1. On a cash basis, a December invoice paid in January counts as January income.

  2. Freelancers often keep their records on a cash basis.

Common collocations

  • cash basis accounting
  • cash accounting
  • accrual basis
  • on a cash basis
  • accrualAn amount recorded in the period it belongs to, even though cash has not yet been paid or received, such as a utility bill that only arrives next month.
  • bookkeepingThe day-to-day recording of a business's transactions, such as sales, purchases, receipts and payments, in its books or accounting system.
  • revenueThe income a business earns from its normal activities, mainly from selling goods or services, before any costs or expenses are deducted.
  • expenseA cost a business has used up in a period to earn revenue, such as salaries, rent, electricity or advertising, which reduces profit.

More terms: Bookkeeping & Ledgers

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This page explains English vocabulary for learners. It is not financial advice.