Accounting Methods

As we discussed, the PerfectWORK platform employs the Double-entry bookkeeping system in its Accounting module; this method is very convenient for keeping every journal entry balanced automatically. As a result, the sum of credit will always be equal to the sum of debits.

In accordance with the timing of recording revenues and expenses, Accounting Methods are classified into two groups.

1. Cash Basis
2. Accrual Basis

So Cash Basis and Accrual Basis accounting are the two different methods for recording tax information on accounting transactions. The recording of the transaction (revenue and expense) time is the notable difference between these two methods. Let us have a look at these two methods.

Accrual Basis

Accrual Basis can be considered the default Accounting method that records tax information on revenue and expenses immediately after the generation of revenue or expense. This method available in PerfectWORK is handy for recording the taxes in the accounting ledgers and tax reports at the moment it occurred.

Cash Basis Method

In the Cash Basis Method, tax on revenue or expenses is reported after receiving cash from customers or after cash payment to suppliers. In this case, the tax on revenues is recorded only when the payments are acquired.

The expenses are reported only when the payment has been made to suppliers or employees. The Cash Basis option can be activated from the Accounting Configuration Settings. The Cash basis accounting will also affect the taxes that can also be created using the same method in association with the invoice or payment.