Cash basis
In accounting, cash basis means recognizing revenue and expense only when cash moves. Not GAAP for any entity — it is a special purpose framework (AICPA AU-C 800), and for tax a method IRS Pub. 538 and IRC §448 limit by entity type and gross receipts.
- Layer
- Lexicon
- Defined in
- Lexicon
- Components
- 1
Not a rule
Not GAAP — special purpose framework; tax rules in IRS Pub. 538. US GAAP governs recognition, measurement and presentation — not the mechanics a bookkeeper uses to get there. Anyone citing a standard for this word is citing the wrong thing.
Every citation in this system, with the text we read and the date we checked it, is in US GAAP and where these rules come from.
The lesson that teaches this
Accounting, 0 to 1 — a free course taught end to end on one month of one company, with the spreadsheet exercises to work it yourself.
Cash basis, in use
Quoted from the 2 documents that use the word — what it does to an interface, in the spec's own sentence.
A P&L on cash basis versus accrual basis are different statements, and a user who doesn't know which they're looking at is being misled.
On cash basis, AR/AP/prepaid/accrual/deferred lines disappear entirely — they don't render as zero, because they don't exist in that view.
For founders
The same idea written for a founder: what it costs a startup that ignores it, and what to do in a real month.
- Why startups should close their books every monthA monthly close turns a bank balance into numbers an investor, an auditor or a 409A firm will accept. What it is, and why it gets expensive to skip.
- US GAAP for early-stage startups, in plain EnglishAccrual accounting, revenue recognition (ASC 606), leases (ASC 842), stock compensation and capitalized software: what each means for a small company.
- How to read an income statement (P&L)Revenue, cost of revenue, gross margin, operating expenses and net income, read line by line, on accrual basis, with the mistakes founders make most.
What it is not called
Each of these is a real word for a different thing. Using it here is what makes a product read as though it was built by someone who has not done the work.
- simple accounting
Components that render this
The concept is not documentation-only. These are the components that name it in their specification, grouped and stated exactly as the catalog states them.
Components that render the terms it depends on
Little in the catalog names this concept outright, but its definition is built out of others that are named. These render expense, revenue.
Terms this one depends on
- ExpenseOutflows or using up of assets, or incurrences of liabilities, from delivering goods or services — recognized when incurred, not when paid
- RevenueInflows or enhancements of assets, or settlements of liabilities, from delivering goods or services — recognized when control transfers, not when cash arrives
- BasisCash or accrual
Also in Foundations
Work with this concept
The calculators that compute it and the ledger payloads that carry it. A definition is where a reader starts; these are where they go next.
Defined in Lexicon. This page is generated from that document, so the two cannot disagree.