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What is the difference between cash and accrual accounting?

Cash Basis

Cash basis accounting is similar to a personal checkbook. Financial transactions are recorded when cash is received or paid out. Income is recorded when cash is received and deposited to the bank. Expenses are recorded when a check is written to pay a bill. Nothing is recorded in your General Ledger unless a Cash transaction occurs.

Accrual Basis

Accrual basis accounting tracks any and all transactions, even if cash is not received or paid out. For example, income is recorded when the dues are assessed, not when they are paid. The same is true for expenses. Expenses are recorded when they are incurred. For example, if the association repairs a roof, the expense is recorded even if the bill has not yet been paid.

Modified Cash Basis

Some associations use modified cash basis accounting for their record keeping. With this method, some transactions are recorded on the cash basis, and some are recorded on an accrual basis. For example, accounts receivable (amounts owners owe the association) and income can be recorded as they are billed (accrual basis); expenses can be recorded as the bills are paid (cash basis).

In TOPS v3.2.1™, Account Receivable accounting method is configured under SETUP, OWNER DATA A/R SETUP; Accounts Payable accounting method is configured under SETUP, Accounts Payable Setup, Control Info.

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