Cash Vs. Accrual

Cash Accounting vs. Accrual Accounting

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Accrual basis accounting is when revenue and expenses are recorded at the time they are “earned”, regardless of when the money was actually received or paid. Cash basis accounting is when revenue and expenses are recognized at the time they are received or paid.

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These accounting practices are often used synonymously in regards to books are typically set to accrual throughout the year and then for reporting purposes such as income tax at the end of the year and possibly for loan consideration, they are set to a Cash basis. AppFolio is automatically set up as cash basis accounting, this makes sense from a tax law perspective because for tax on rental income it is recognized when it is received and cannot be accrued for.

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This is a quick summarization of the topic of Cash vs. Accrual. It's important to have accounting professionals that are knowledgeable with this and other accounting principles.