Understanding the Basics
Cash accounting records income when money is received and expenses when they’re paid.
Accrual accounting records income when earned and expenses when incurred — regardless of when the money changes hands.
Pros and Cons of Cash Accounting
✅ Simple to maintain
✅ Better short-term cash visibility
❌ Not great for long-term planning
❌ Can distort actual profitability
Pros and Cons of Accrual Accounting
✅ More accurate financial picture
✅ Required for businesses with inventory or over $25M in revenue
❌ More complex
❌ Requires more bookkeeping discipline
Which Should You Use?
- Sole props and small service businesses often stick with cash
- Growing companies, contractors, and those seeking loans benefit from accrual
- If you plan to scale or sell, accrual is a must
Final Thoughts
Choosing the wrong method can mess up your taxes, confuse your reports, and limit your ability to plan. Make the decision based on your goals — not just convenience.
✅ Not Sure Which Method to Use?
We’ll evaluate your current setup and help you choose the best accounting method for your business stage — and your tax strategy.
📞 Book your accounting method consult today
👉 https://calendly.com/castlerocktax/30min
📲 Prefer to talk first? Call us at 786-686-6285
🧮 Smart, clear, strategic. That’s how we do accounting.