Cash vs accrual

The two ways to keep your books. Cash basis records money when it actually moves. Accrual basis records it when it is earned or owed, regardless of when the cash arrives. Which one you use changes what your financials mean.

What it is

On cash basis, you book revenue when the customer pays and an expense when you pay the bill. Simple, and it tracks your bank account. On accrual basis, you book revenue when you deliver the work and an expense when you incur it, even if the cash moves weeks later. Accrual gives a truer picture of a period's performance; cash gives a truer picture of liquidity. Most growing companies run accrual for the P&L and watch cash separately.

Why CEOs care

Because an AI reading your financials will draw the wrong conclusion if it does not know which basis you are on. Ask "why did margin drop in March" on an accrual P&L and the answer is about earned revenue and incurred cost; on a cash P&L it might just mean a big customer paid late. Tell the AI your basis up front, every time, or it will confidently mislead you.

Where you'll see it

In the P&L Q&A workflow, where naming your basis is step one before you ask the model anything.

Example

A CEO uploads an accrual P&L and prefaces the chat with "these books are accrual basis." Now the AI's read of a margin dip points at real cost changes, not payment timing.

Related

• general-ledger
• ar-ap-aging