--- title: "Cash vs. accrual accounting: which fits your business? | MCC" description: "The difference between cash and accrual accounting for a small business, who can use each for taxes, and how to decide with your accountant." url: "https://mcc-solutionsnj.com/bookkeeping/guides/cash-vs-accrual-accounting" --- Bookkeeping guide · Updated October 12, 2026 # Cash vs. accrual accounting: which fits your business? The two methods differ in when you count income and expenses. The right one depends on your business and your tax situation. By [Matthew Coleman](/about), MCC Solutions **Quick answer.** Cash basis counts income when money arrives and expenses when you pay them. Accrual counts them when earned or incurred. Cash is simpler and matches your bank account, and many small service businesses use it. Want this handled for you? Monthly bookkeeping, cleanup and year-end close for small businesses. Start with a free health check of your books. [Free health check](/bookkeeping/health-check)[Get a quote](/bookkeeping/#interest) **Related:** [Owner contribution or loan](/bookkeeping/guides/owner-equity-and-capital-contributions) · [Closing entries and retained earnings](/bookkeeping/guides/closing-entries-and-retained-earnings) · [Void vs delete a transaction](/bookkeeping/guides/voiding-vs-deleting-transactions) **Free tools:** [Credit card fee calculator](/bookkeeping/credit-card-fee-calculator) · [How many sales do I need to break even?](/bookkeeping/break-even-calculator) [![Intuit ProAdvisor Gold tier badge](/img/credentials/intuit-proadvisor-gold.png)](https://proadvisor.intuit.com/app/accountant/search?searchId=matthew-coleman77)Gold tier in Intuit's ProAdvisor program. [See my Intuit listing](https://proadvisor.intuit.com/app/accountant/search?searchId=matthew-coleman77) Keeping your own books? Tallyfinch does invoices, bank import and reports on your computer. [See Tallyfinch](/bookkeeping/mcc-books-downloadable-bookkeeping-software) ## Cash basis Income counts when money arrives and expenses count when you pay them. It is simple and matches your bank account, and it is what many small service businesses use. ## Accrual basis Income counts when you earn it and expenses when you incur them, whether or not cash has moved. It shows what the business actually owes and is owed, which helps if you invoice customers or carry inventory. ## Which can you use for taxes? The IRS lets many small businesses use the cash method, with limits and exceptions, and businesses that carry inventory or exceed certain gross-receipts thresholds may need accrual for tax. Ask a CPA or enrolled agent which applies to you. Your books can also be kept on accrual even if your tax return is on cash. ## How to choose Think about who needs the numbers. A lender, investor or buyer may ask for accrual statements. Owners who just want to know what is in the bank may prefer cash. Whichever you pick, use it consistently, and talk to your tax professional before changing. ## Common questions **Can I switch from cash to accrual?** Yes, but a change in the tax accounting method may need IRS approval. Speak to your CPA first. **Which does QuickBooks use?** QuickBooks can show reports on either basis. Your books are kept in a way that supports both. This guide is general information, not tax, legal or accounting advice. Rules, fees and due dates change; check with the IRS, the NJ Division of Taxation or a licensed professional for your situation. Let us handle it [### Monthly bookkeeping Categorizing, reconciling and monthly reports, with cleanup, payroll and NJ filings available. Bookkeeping →](/bookkeeping/) [### QuickBooks Online Monthly bookkeeping, cleanup and reconciliation in QuickBooks Online for New Jersey small businesses. Your account stays in your name. QuickBooks →](/bookkeeping/software/quickbooks-online)[### Xero Bookkeeping and reconciliation in Xero for New Jersey small businesses, including cleanup and moving from spreadsheets or another program. Xero →](/bookkeeping/software/xero) More guides - [How to read a profit and loss statement](/bookkeeping/guides/how-to-read-a-profit-and-loss-statement) - [How much does small business bookkeeping cost?](/bookkeeping/guides/how-much-does-bookkeeping-cost) - [Double-Entry Bookkeeping Explained Simply](/bookkeeping/guides/double-entry-bookkeeping-explained) - [Debits and Credits Cheat Sheet for Owners](/bookkeeping/guides/debits-and-credits-cheat-sheet) Free tool - [Bookkeeping health check](/bookkeeping/health-check) [All guides](/bookkeeping/guides) Reach small business owners, freelancers and bookkeepers who read this guide: [advertise here](/advertise#bookkeeping). Do it yourself ### Accounting Student Study Workbook Type the entries, see the statements update and check your work against the answer key. [See what's inside ($19)](/toolkits/accounting-student-study-workbook) [Free sample](/toolkits/accounting-student-study-workbook#free-starter)14-day full refund Course: [Small Business Bookkeeping Basics](/courses/small-business-bookkeeping-basics) ($49) covers chart of accounts, reconciliations, the monthly close, payroll and 1099 basics for owners. It is training with a certificate of completion, not a credential. [![Cover of Bookkeeping Fundamentals (ebook) by Matthew Colt](/img/toolkits/bookkeeping-fundamentals-ebook/cover.webp)](/toolkits/bookkeeping-fundamentals-ebook) From the bookshelf ### Bookkeeping Fundamentals A college-level bookkeeping course, without the tuition. By Matthew Colt, $9.99 as an ebook (EPUB and PDF). [See the book](/toolkits/bookkeeping-fundamentals-ebook) [Read the first pages free](/toolkits/bookkeeping-fundamentals-ebook#free-starter) On the accrual basis, the month-end entries that matter most are accruals: [how to record accrued expenses and revenue](/bookkeeping/guides/accrued-expenses-and-revenue-explained). Tallyfinch ### Books you keep on your own computer Tallyfinch does invoices, bills, bank import, reconciliation and the main reports, in a file you own. $99 once, then $5 a month for updates; the app keeps working if you stop the plan. It does not do payroll or sales tax filing. The free download records up to 60 entries. [See Tallyfinch](/bookkeeping/mcc-books-downloadable-bookkeeping-software) [Download it free](/tools/pro/trial/mccBooks) [Compare the three apps](/software) ## Rather have us keep the books? Ask for a quote. [Get a Quote](/bookkeeping/#interest)[Call (908) 444-6373](tel:+19084446373)