What is cash basis accounting and accruals accounting?

There are 2 main methods of accounting - accruals accounting and cash basis accounting.

Accruals accounting means that you or your accountant record your business income or expenses when they occur rather than when the transaction is actually sent.

Cash basis accounting is different as it only records income and expenses for the business once the transactions happen.

Most sole traders use cash basis accounting as this is widely regarded as the easiest method to record business finances. Our maing Tax Digital for Income Tax tool is built for customer who use cash basis accounting.

Accruals accounting customers can use our Making Tax Digital submission tool to do your quarterly updates, but you will need to use a different Making Tax Digital tool to accurately complete their end of year tax filing.