Accounting Dictionary
Cash basis
The cash basis is one of the two principal recognized methods of accounting. It must be used by all taxpayers who do not keep books. It is elective as to all other taxpayers (except corporations, certain partnerships, and tax-exempt trusts); however, it may not be used if inventories are necessary in order to reflect income. On the cash basis, income is reported only as it is received, in money or other property having a fair market value, and expenses are deductible only in the year they are paid.