What is cash-basis accounting?
Cash-basis accounting records revenue when cash is received and expenses when cash is paid, ignoring accruals or commitments. This is the simplest accounting method and is commonly used by very small businesses, freelancers and early-stage startups before they need GAAP-compliant financials.
Cash-basis is restricted for tax and reporting purposes: U.S. companies with average annual gross receipts above US$30 million (for tax years starting in 2025) must use accrual basis under Internal Revenue Code Section 448. Turkish companies similarly transition to accrual basis under TFRS for public-interest entities.