Cash method accounting versus accrual method accounting in the cash-based accounting system a transaction will be recorded only when money is transferred and in accrual method of accounting the revenue and expenses are recorded when the transaction happens cash does not need to be exchanged between the parties for example if you received the raw.

Materials for your product last year but you did not have the money to pay for it unless you sold your own finished goods and then you end up paying for it this year in the cash accounting method the expense will be recorded in this year 2022 but in the accrual accounting method the.

Expense was to be recorded right when you received the raw materials when compared with each other accrual method is mostly considered to be the superior one since we can see the accounts receivables and payables as well and understand where the company really stands