Cash accounting, also known as cash basis accounting, is a straightforward method where transactions are recorded only when cash is received or paid.

This approach is typically used by small businesses and individuals because of its simplicity. Under cash accounting, income is recorded when it is actually received, and expenses are documented when they are paid, not when they are incurred. This contrasts with accrual accounting, which records income and expenses when they are earned or incurred, regardless of when the money is exchanged.

Cash accounting gives a clear snapshot of cash flow but may not reflect the full financial picture of a business over time.