Cash basis bookkeeping is a way of recording transactions in which the income and expenses for the business are recorded based on when cash changes hands. This systematic approach can help businesses truly understand their financial situation, as each transaction is documented clearly and concisely. Unlike accrual basis bookkeeping that records transactions regardless of when money is received or paid out, cash basis bookkeeping only accounts for transactions where money has actually been exchanged. With this method, business owners have greater insight into their available capital and liquid assets, as well as their daily spending habits.