Cash-basis accounting is one of the two most common ways of keeping track of a company's revenues and expenses. The other method is accrual-basis accounting.
With cash-basis accounting, revenues are recorded in the accounts when cash is received from customers, and expenses are recorded in the accounts when cash is paid out, regardless of when sales or purchases are invoiced. However, the program updates your vendors, customers, and inventory and services records as soon as you make an entry. These records are always up to date.
Note:
Cash sales and purchases in the Sage Simply Accounting program are not related to cash-basis accounting. If you pay an invoice at the time of purchase, it is a cash purchase. If the customer pays at the time of the sale it is a cash sale, no matter what type of accounting is used. Expenses or revenues are recorded in the accounts at the time of a cash purchase or sale, in both accrual-basis and cash-basis accounting.
If you are using cash-basis accounting, do not turn it off to make an accrual-basis entry. Enter a transaction with a date earlier than the Cash Accounting Date instead.
To start using cash-basis accounting
Decide whether to use cash-basis or accrual accounting
Learn about entering purchases
Learn about deposits and prepayments