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Cash accounting

What is cash accounting?

Cash accounting is a method of accounting where revenues are recorded when cash is received, and expenses are recorded when they are paid. This method does not recognize accounts receivable or accounts payable.

While the cash accounting method is simpler and more straightforward than the accrual method, it may not provide a realistic picture of a company's financial health, as it doesn't account for money that is owed to the business or money the business owes. It's typically used by small businesses that conduct business primarily in cash.

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