Cash vs. accrual accounting

Cash and accrual accounting recognize activity at different times. Choose the basis that answers your question, and use the same basis when comparing reports.

The basic difference

• Cash basis: income and expenses are generally recognized when money is received or paid.
• Accrual basis: income is generally recognized when earned and expenses when incurred, even if payment happens later.

An invoice example

You complete work and issue a $1,000 invoice in March. The customer pays the full amount in April. With no tax, fees, or other adjustments:

Basis	March income	April income
Cash	$0	$1,000
Accrual	$1,000	$0

It is the same sale, shown in a different period. Do not add another income entry simply because the cash-basis March report does not show the unpaid invoice.

A vendor bill example

You receive a $200 bill in March for a service used in March and pay it in April. Under accrual accounting, the expense generally belongs in March; under cash accounting, it generally appears when paid in April.

This example concerns an ordinary operating expense. Inventory, long-term assets, prepayments, and tax treatment can require additional accounting rules.

Choose a basis in Bokeping

1. Open Reports → Profit and Loss and select your date range.
2. Find Accounting method beside the period controls. In a condensed toolbar, open More actions to find it.
3. Choose Cash or Accrual.
4. Confirm the basis shown below the report before comparing or exporting it.

To review the company’s default, open Settings → Company → Edit and find Accounting method under Financial & regional settings. Changing a report view does not by itself change how your business is required to file taxes.

Keep comparisons consistent

Compare the same company, period, and basis. A Balance Sheet is a snapshot at a date; Profit and Loss covers a range. A bank balance is not a substitute for either report.

Ask your accountant which basis is appropriate for your reporting and tax needs. See read your financial statements for a guide to the main reports.

Advances applied in a later month

Keep the original receipt or payment date distinct from the date it settles a later invoice or bill. Compare both report periods using the saved application date; do not assume a current paid balance rewrites the earlier period. See application dates and the separately checked accrual/cash examples for customer deposits. For an unapplied customer advance used later, the tested Bokeping cash-basis income appears in the application month. The bank receipt keeps its original date. This software report behavior does not decide tax treatment.