Accrual accounting vs Cash accounting

So you're entering your Data into Ledgerble, and I am sure you, like myself wonder, how come I have to enter an invoice first, then once it's paid go back to the same invoice and record a payment, why don't I do it all in one step and only enter stuff once I get paid or once they are paid for?

Well I am sure most of you have heard the word accrual before, and that's the reason. Most businesses and accountants and governments, want to go with accrual recording. Basically that income or expenses are recorded in the books the day they are earned or incurred. The reason behind that is that in theory, accrual reporting gives a better view of your business. Let's say for example that you landed a $12,000 dollars contract and received a deposit of $4,000, and that in order to complete it you had to spend $4,500, if you are using the cash method then you would show a loss of $500 dollars.

The cash method only takes into accountant the cash spent and the cash earned, so it would ignore completely that you have another $8,000 to be paid to you and that you have in fact made a healthy profit of $8,500 for the current period.

Does that mean that cash is always different than accrual ? Not necessarily. If a business makes all it's sales in cash and pays all it's expenses the second they are incurred. Then there will not be a big time difference and both methods will reflect the same thing.

Does ledgerble allow you to run cash accounting ? yes it does all you need to do is mark your invoices as paid and your expenses as paid every time you enter them. We however do not recommend it, especially if you ever need to report to a government agency.