Cash basis and accrual basis accounting are two methods used to keep track of a business’s finances. Cash basis accounting is simple and records income when money is actually received, while expenses are recorded when they are actually paid. Accrual basis accounting takes into account all obligations that have been incurred but not yet paid or received. Revenue is recorded when it is earned, regardless of when the money is received, and expenses are recorded when they are incurred, regardless of when they are paid. Cash basis accounting is often better suited for small businesses while accrual basis accounting is better for larger ones. Ultimately, choosing the right tax basis can help ensure a company’s financial health.