Cash-based accounting is a method of recording transactions that focuses solely on cash inflows and outflows. When using this type of accounting, only transactions that involve actual cash are recognized – meaning any services or goods that were provided on a credit basis are not included. This method of accounting can help a business to more closely track their incoming and outgoing cash flow, providing a better understanding of their financial position and allowing them to make more informed decisions. By providing a true picture of the company’s finances, cash-based accounting offers businesses a greater level of clarity and insight into their operations.