How Cash Basis and Accruals Differ

💰 Cash Basis

Record income when money arrives in your bank account and expenses when money leaves. Simpler and more intuitive.

📊 Accruals (Traditional)

Record income when you invoice customers and expenses when you receive bills, regardless of payment timing.

Important: Cash basis accounting is only available for sole traders and partnerships (not limited companies). Limited companies must use accruals accounting.

Compare Methods with Your Numbers

Example scenario: You invoiced clients £15,000 but only received £12,000 in payments. You received bills for £8,000 but only paid £5,000 so far.

Total Amount Invoiced to Customers (£)

Amount Actually Received from Customers (£)

Total Amount Billed by Suppliers (£)

Amount Actually Paid to Suppliers (£)

Cash Basis

£0

Income: £0
Expenses: £0
Profit: £0

Records only actual money movements. No tax on unpaid invoices.

Accruals

£0

Income: £0
Expenses: £0
Profit: £0

Records all invoiced amounts. May show tax on money not yet received.

Our Recommendation

Who Can Use Cash Basis?

Sole traders with turnover under £150,000
Partnerships (without corporate partners)
Businesses with straightforward finances

Who Must Use Accruals?

Limited companies (required by law)
Businesses seeking bank loans (often required)
Complex businesses with high inventory

Disclaimer: This calculator is for educational purposes only. Actual accounting requirements depend on your business structure, turnover, and other factors. Limited companies must use accruals accounting. Please consult official HMRC guidance or your accountant for advice specific to your situation. By using this tool, you agree to our Terms and Conditions.

Bridgly uses cash-basis accounting

Built specifically for UK micro-entity limited companies using simple cash-basis bookkeeping. No accounting jargon, just clear records.

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