When you start a new business, you have to make a decision regarding how you will approach your financial management. Two basic methods are available to you: cash basis or accrual basis.
Cash basis is an accounting method that counts income only after cash or a check is received and expenses are not counted until they have been paid. This method is the most popular accounting method among entrepreneurs and small businesses.
Accrual basis is an accounting method that counts income when orders are placed or services are requested, regardless of payment being received. Expenses are counted when your request for good or services is fulfilled.