Cash Basis for Dummies
noun
pronunciation: kæʃ_'beɪsɪsWhat does Cash Basis really mean?
Alright, so let's talk about "cash basis." When we talk about cash basis, we're talking about a way of keeping track of the money coming in and going out of an organization. It's kind of like keeping track of the money in your piggy bank - you only count the money when it actually goes in or out of the piggy bank, not when you just think about putting money in or taking it out.
So, when a business or organization uses the cash basis method, they only record income when it is actually received, and expenses when they are actually paid. It's like keeping a simple record of your allowance - you only write it down when you actually get the money or spend it, not when you think about it.
This is different from another way of keeping track of money, called accrual basis, where you record income and expenses when they are earned or incurred, regardless of when the money actually changes hands.
So, to sum it up, cash basis means you only record income and expenses when the money is actually received or paid, rather than when it is earned or incurred. It's like only counting the money in your piggy bank when it actually goes in or out, not when you just think about it. Easy peasy, right?
So, when a business or organization uses the cash basis method, they only record income when it is actually received, and expenses when they are actually paid. It's like keeping a simple record of your allowance - you only write it down when you actually get the money or spend it, not when you think about it.
This is different from another way of keeping track of money, called accrual basis, where you record income and expenses when they are earned or incurred, regardless of when the money actually changes hands.
So, to sum it up, cash basis means you only record income and expenses when the money is actually received or paid, rather than when it is earned or incurred. It's like only counting the money in your piggy bank when it actually goes in or out, not when you just think about it. Easy peasy, right?
Revised and Fact checked by Alex Johnson on 2023-11-13 20:20:33
Cash Basis In a sentece
Learn how to use Cash Basis inside a sentece
- When you buy groceries and pay for them immediately with cash, that's an example of using cash basis.
- If you lend your friend $20 and they pay you back the next day in cash, that's also cash basis.
- A small business might keep track of their income and expenses using the cash basis method, meaning they only record transactions when money actually changes hands.
- If you receive your monthly allowance in cash and only spend that actual cash, then you're operating on a cash basis.
- When you pay for a concert ticket with cash at the box office, that's another example of cash basis.
Cash Basis Antonyms
Words that have the opposite context of the original word.
Cash Basis Hypernyms
Words that are more generic than the original word.