Fundamental Glossary / Earnings & Accounting Concepts
Cash Accounting
Recording transactions only when cash is received or paid.
Formula
Revenue when collected, expenses when paid. Generally not the basis of a company's statutory financial statements.
What it means
Cash accounting is simple and hard to spin. It is also a poor picture of a period, because a large collection of old bills looks like a great month.
Small businesses and some tax computations use cash or hybrid methods. Listed-company accounts use accrual accounting.
How to read it
You can still build a cash picture of an accrual filer from the cash flow statement. That is analysis, not a change of the company's books.
What to watch
A management slide that shows "cash profit" is not cash accounting. Ask for the reconciliation to the audited cash flow statement.
This note explains the term. It is not a research recommendation, a target price, or a comment on any security. Ratios and regulatory thresholds change; use the latest filing or circular for a live figure.