Cash vs accrual accounting
The two methods differ on one question: when does a sale or a cost go into your books? Cash accounting waits for the money to move. Accrual accounting records it when it happens. Here is how business.gov.au sets out the difference.
- By Book Keeping Pros
- Sources checked 15 Oct 2026
The main differences
- Cash accounting records a sale when the customer's payment arrives and a cost when you pay the bill.
- Accrual accounting records sales and expenses when they take place, whether or not money has changed hands.
- Cash accounting does not show what customers owe you or what you owe suppliers. Accrual accounting shows both.
- The business.gov.au guide calls cash accounting a simple system and accrual accounting more complicated.
How each method records the books
| Question | Cash accounting | Accrual accounting |
|---|---|---|
| When a sale is recorded | When you get the customer's payment | When you invoice for completed work, even before you are paid |
| When a cost is recorded | When you have paid the invoice | When it takes place, not when cash changes hands |
| Money owed to you and by you | Not shown | Shown |
| How involved it is | A simple system that keeps track of your business cash flow | More complicated than cash accounting |
| A business it suits | Smaller businesses with mostly cash transactions, such as a hairdresser or grocery store | Businesses that don't get paid straight away, such as architects who invoice after the work |
Source: Department of Industry, Science and Resources, Choose between cash and accrual accounting. Checked 15 Oct 2026.
General information
This page compares the two methods only as ways of keeping your books. It is general information, not advice about which method your business should use. How the method you choose affects tax is a question for your accountant. Sources checked 15 October 2026.
Sources
- Choose between cash and accrual accounting
Department of Industry, Science and Resources. Current at 15 October 2026, released 13 September 2024. Checked 15 October 2026.
© Commonwealth of Australia 2020 (business.gov.au), licensed under CC BY 3.0 AU Licence: CC BY 3.0 AU.