Cash accounting basis is a way of accounting for revenue and expenses where income is recorded when the cash is received, and expenses are recorded when they are paid out. This method differs from the accrual basis, which records income and expenses when they are incurred – not necessarily when payment is made. While this makes tax calculations simpler, it can lead to inconsistencies between stated income levels on financial statements and reported taxes paid. Proper usage of a cash accounting system requires close tracking of transactions in order to ensure accuracy.