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Understanding accounting methods, by small business accountants in Melbourne

So officially there are two types of accounting methods, which dictates how the company’s transactions are recorded and these are cash-basis accounting and accrual accounting. Our small business accountants in Melbourne will explain the two accounting methods for you.

Cash basis accounting is when companies record expenses in financial accounts when the cash is actually laid out or they only book revenue when it has successfully been transferred into their accounts or they’ve been given cash in hand. Most of the time it is smaller companies that use this form of accounting mainly due to the system being a lot easier to handle.

While on the other hand, accrual accounting actually records revenue when the transaction is complete, such as a specific piece of work in a contract agreement between the company and its customer. Expenses are held in the same way, so everything is recorded instantly for the business. So if you’re confused as to what accounting method you should be using, let our business accountants in Melbourne assist with the process and decision-making!

Feel free to contact our Melbourne small business accountants with any enquiries that you have regarding your small business accounts.