Accrual vs Cash Basis Accounting is like the difference between night and day. On the one hand, we have the accrual basis of accounting where revenues, expenses, gains and losses are all recorded as they occur, regardless of whether cash has been exchanged. In essence, all that matters is the when something is earned or incurred, not the actual payment of cash. On the other hand, we have the cash basis of accounting where revenues and expenses are only recorded once cash is received or paid out respectively. So if you are looking to accurately account for your business activities, it is imperative to choose between either accrual or cash basis accounting.