Bookkeeping Basics: Cash vs Accrual for Indian Small Businesses

Cash accounting records income when received and expenses when paid. It is simple but distorts the picture of profitability in a given period — especially when you bill clients on credit or pay vendors in advance. Accrual accounting records income when earned and expenses when incurred, regardless of cash movement. GST returns are filed on accrual (invoice date), and so is income tax for most businesses above the presumptive threshold. For an SME with turnover above Rs 1 crore or with significant credit transactions, accrual accounting is non-negotiable. Use accounting software (Zoho Books, TallyPrime, QuickBooks) that supports both modes and produces GST-ready reports.