Kassapõhisus

Kassapõhisus, also known as cash basis accounting, is an accounting method where revenue is recognized when cash is received and expenses are recognized when cash is paid. This is in contrast to accrual basis accounting, where revenue is recognized when earned and expenses are recognized when incurred, regardless of when cash changes hands.

Under the cash basis, a business's financial statements will only reflect transactions for which cash has actually been exchanged. For example, if a customer purchases goods on credit, the revenue is not recorded until the customer pays the invoice. Similarly, if a business receives a bill for services rendered but has not yet paid it, the expense is not recorded on the income statement.

This method is generally simpler to understand and implement than accrual accounting, making it popular among small businesses and individuals for tax purposes. However, it can provide a less accurate picture of a company's financial performance and position over a given period. For instance, a business might appear profitable under the cash basis even if it has significant outstanding bills or uncollected receivables, which could lead to cash flow problems.

Regulations for publicly traded companies and larger businesses typically require the use of accrual accounting due to its more comprehensive reporting of financial health. Many jurisdictions also mandate accrual accounting for tax reporting under certain revenue thresholds. Therefore, while cash basis accounting has its place, its applicability is often limited by business size and regulatory requirements.