cash basis

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Explanation of "Cash Basis"

Definition: "Cash basis" is a method of accounting where you record income and expenses only when cash is actually received or paid out. This means you don’t count money that you are supposed to receive in the future or expenses that you have agreed to pay later.

Usage Instructions:

• Use "cash basis" when talking about accounting practices or financial matters.
• It is often used by small businesses and individuals who prefer to keep things simple.

Example:

• Simple Example: If you run a small bakery and you sell a cake for $20, you record that sale on the day the customer pays you the $20, not when the cake was ordered.

Advanced Usage:

• In more complex financial discussions, you might compare "cash basis" with "accrual basis," which is another accounting method where you record income and expenses when they are earned or incurred, regardless of when the cash is exchanged.

Word Variants:

• Cash Basis Accounting: This is a noun phrase that refers to the system of accounting itself.
• Cash Basis Method: Similar to cash basis accounting, emphasizing the approach taken.

Different Meanings:

• The term "cash basis" primarily refers to accounting, but in other contexts, "cash" can refer to actual money, and "basis" can mean foundation or reason.

Synonyms:

• Cash Accounting: This is another term for cash basis accounting.
• Immediate Recognition: This describes the same concept of recognizing income and expenses only when cash is involved.

Idioms and Phrasal Verbs:

• "Pay as you go": This idiom means to pay for things at the time you receive them, similar to cash basis accounting.
• "In the black": This phrase means to be profitable or have positive cash flow, which is a goal of using the cash basis method.

Summary:

In summary, "cash basis" is a straightforward accounting method where you track money only when it changes hands. It is useful for keeping finances simple, especially for small businesses.

Academic

Noun

1. a method of accounting in which each item is entered as payments are received or made