The cash accounting method records income only when the cash is received for an invoice, regardless when it was invoiced. Similarly, expenses are recorded when a payment is disbursed, regardless when it was purchased or received.
This term describes an accounting method whereby only invoices and bills which have been paid are accounted for. However, for most types of business in the UK, as far as the Inland Revenue are concerned as soon as you issue an invoice (paid or not), it is treated as revenue and must be accounted for. An exception is VAT : Customs & Excise normally require you to account for VAT on an accrual basis, however there is an option called 'Cash Accounting' whereby only paid items are included as far as VAT is concerned (eg. if most of your sales are on credit, you may benefit from this scheme - contact your local Customs & Excise office for the current rules and turnover limits). [Go to source
The process of recognising financial transactions only when there is a cash impact as opposed to accrual accounting (see accrual accounting above). In cash accounting an expense is recognised only when the invoice is paid.