Accrual or cash accounting is a fundamental concept in business, and all businesses need to understand the differences between them. Accrual accounting is based on the accrual principle, which is an accounting concept that says expenses should be recognized when they are incurred, regardless of when payment is received. This allows businesses to recognize revenue as it’s earned, rather than when cash is received. Cash accounting, on the other hand, only recognizes transactions when payment has been received. While this method is simpler and results in lower taxes, it doesn’t accurately reflect a company’s true financial status and can lead to discrepancies if not managed properly. Ultimately, both methods are important components of any successful business and should be considered when weighing your options.