Bookkeeping

Cash basis accounting

Recording income when money is received and expenses when they are paid. Simple, allowed for small businesses in many EU countries.

What Cash basis accounting means

Under cash basis accounting a transaction enters the books at the moment cash changes hands. Revenue is recognised when the customer pays, not when the invoice is issued, and an expense is recognised when the supplier is paid. There are no receivables, payables or accruals, so the books are close to the bank statement and easy to keep.

Most member states allow sole traders and small businesses below a turnover limit to determine taxable profit on a cash basis, sometimes under names such as income and expense records or simplified bookkeeping. Many also allow a cash accounting scheme for VAT, where VAT becomes due only when the invoice is paid. The downside is a weaker picture of what is owed and owing, which is why growing businesses move to accrual accounting. Kontevia supports both methods and tracks payment dates for the cash view.

Related terms

Accrual basis accountingRecording income and expenses in the period they belong to, regardless of when the cash moves. The standard method for companies across the EU.Bank reconciliationMatching every transaction on the bank statement with an invoice, receipt or other record so the books and the bank agree.Sole trader (self-employed)An individual running a business in their own name with unlimited liability. The simplest legal form, taxed under personal income tax.Tax returnThe periodic declaration a business files with the tax authority to report its tax base and the tax due. VAT returns are monthly or quarterly; income tax returns are annual.

This entry is general information, not tax advice. Rules change; check the current position with your adviser or the tax authority of your country.

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Kontevia applies these rules for you

Rates, thresholds and e-invoicing formats come from the jurisdiction data of your country. You send the document, Kontevia books it and keeps the VAT summary ready.

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