Cash vs Accrual Accounting | Wonso
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Kirjoittanut
Kari Honkanen
Snapshot
Snapshot Accounting isn't just about keeping records—it's about clarity and compliance. The two primary methods, cash and accrual, serve different purposes. While cash accounting tracks money as it physically moves, accrual accounting provides deeper insight by aligning revenue and expenses to the periods they're actually earned or incurred.
For businesses exceeding $25 million annually, the IRS mandates accrual accounting. This method, though more complex, gives investors and regulators a clearer financial picture, crucial for compliance and strategic growth. Wonso simplifies this complexity, seamlessly automating deferral and accrual entries directly within QuickBooks Online.
Why the Right Accounting Method Matters Consider a consulting firm that bills quarterly retainers upfront. With cash accounting, the business sees irregular revenue spikes, creating confusion for investors, lenders, and tax reporting. Accrual accounting evenly distributes income, accurately reflecting performance and ensuring regulatory compliance.
Accounting Method | Advantages | Challenges |
|---|---|---|
Cash Basis | Simple, intuitive cash tracking | Misleading if dealing with credit or inventory |
Accrual Basis | Accurate performance insights, IRS-compliant, preferred by stakeholders | Requires regular adjusting entries |
When Cash Basis Makes Sense
Small-scale freelancers and consultants
Businesses operating strictly on immediate cash transactions
New businesses avoiding early complexity
Switching to Accrual Smoothly with Wonso
Reconcile accounts fully under cash accounting first.
Enable accrual accounting settings in QuickBooks Online.
Integrate Wonso for automated opening AR/AP entries.
Set automated deferral rules for ongoing transactions.
Validate accuracy by reviewing parallel cash and accrual reports initially.
A Founder’s Perspective: Accrual accounting isn't just a preference—it's a necessity as your business grows. Wonso takes the complexity out of this essential transition, allowing your team to focus on growth, not bookkeeping headaches.
