Cash basis accounting for nonprofits is a type of accounting method that records transactions only when cash is received or disbursed. This means that revenue is recognized when cash is received, and expenses are recognized when cash is paid out. This method is simple and straightforward, but it may not accurately reflect the organization’s financial performance or position, especially if there are outstanding receivables or payables. Additionally, cash basis accounting is not generally accepted for financial reporting purposes and may not comply with Generally Accepted Accounting Principles (GAAP).
What Other Accounting Basis Methods are Available for Nonprofits?
There are two other commonly used accounting methods for nonprofits: accrual basis accounting and modified cash basis accounting. Learn more about the differences between cash basis, accrual basis, and modified cash basis accounting by visiting this article: