Cash Basis

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Cash Basis

A method of accounting that considers only money actually received as income and only money actually paid out as expense.

For Income Tax purposes, taxable income is computed under cash basis accounting as the difference between income received and expenses paid out within the tax year.

Cash basis accounting is not the same as Accrual Basis accounting.

References in periodicals archive ?
The cash basis and simplified expenses schemes can help save small businesses time and money.
Before assigning the first case, the instructor should review the basic accounting equation and expand the equation to focus on differences between the cash basis and accrual basis: Add simple matrices that show the additions and subtractions involved with conversion of the cash basis to the accrual basis.
This modified cash basis of accounting combines elements of the cash and accrual basis of accounting.
Whoever warned against counting chickens before they've hatched was clearly a proponent of cash basis accounting.
Pay Contested Taxes And Other Deductible Expenses: Both accrual and cash basis taxpayers deduct contested taxes and expenses in the year paid even though the ultimate results of the contest are uncertain.
He says the impact on the partnership will depend on the basis of accounting it is using, with those accounting purely on a cash basis facing the most substantial hike.
The company continued to report its software-generated revenue on the cash basis, but reported its hardware income on the accrual basis for tax and financial purposes.
Generally, a controlling shareholder-lessor will be on the cash basis and include rental income in the year received.
To avoid misunderstanding, it is important to distinguish between the cash basis and the modified cash basis.
However, you may want to temper your review with a practical approach; that is, eliminate the unusual and nonrecurring events and remember that the difference between GAAP basis revenues and a cash or modified cash basis may not be significant on a year-to-year basis.
income earned but not yet recognized under the cash basis, due to the fact it has not yet been received) of $150,000 and accounts payable (i.
and Canada, and is looking to acquire these facilities on an all cash basis and via sale leaseback arrangements.