Accounting basis

Tax Glossary Definition

Accounting basis

Accounting Basis – The framework an organization uses to record and report financial transactions. The two main approaches are cash basis, where entries are made when money changes hands, and accrual basis, where transactions are recognized when revenues are earned or expenses incurred, regardless of payment timing. Some entities apply a hybrid basis, blending aspects of both systems.

Example: Using the accrual basis, a company records credit sales as revenue immediately, even before receiving payment.

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