Accrual VS Cash

The cash method is very simple and easy to understand. Sales are recorded when money is gained. Expenses are recorded when you spend money. The problem with the cash method, however, is that it doesn’t always reflect the economic reality of a situation. The cash method only recognizes when money changes hands.

With the accrual method of accounting, revenue is recorded as soon as services are provided or goods are delivered, regardless of when cash is received. It's a good idea to learn the accrual method because it's the only method for the GAAP-Generally Accepted Accounting Principles.