Cash vs accrual, decided in one page
Cash basis records money when it moves; accrual records events when they happen. The difference sounds academic until the first big receivable.
What each shows
Cash basis: your bank flow, nothing else — no receivables, no payables, no inventory truth. Accrual: the period's economic reality — revenue earned, costs incurred — which is why lenders, buyers and the CRA (for corporations) expect it.
Who uses which
Most Canadian corporations report accrual. Cash basis survives mainly in very small unincorporated operations and specific sectors (farming and fishing have elections). If you carry inventory, accrual is effectively mandatory to mean anything.
The practical answer
Keep accrual books and read cash separately — which is exactly the design here: an accrual ledger with a Cash Flow statement and dashboard beside it. Both truths, no bookkeeping fork.
Why profitable businesses run out of money
Accrual accounting records a sale when it is earned; cash accounting records it when the money arrives. For a business selling on account the gap between those two moments is where cash-flow crises live — a record month on the P&L can coincide with an empty bank account.
Neither view is wrong. Reading only one of them is.
Which to use, and when
Most incorporated Canadian businesses report on an accrual basis, and it is the more truthful picture of performance because it matches revenue to the period that earned it. Cash is the more truthful picture of survival. Owners generally need to look at both weekly and are best served by software that produces each without a rebuild.
Whichever basis you report on, the operating question — will there be money on Friday? — is a cash question.
What SeroBooks does with this
The Cash Flow dashboard is built from settled payments rather than invoices: money in, money out, net and a running balance by day, plus the split by payment method — where a large cheque figure means money that still has to clear. The P&L, built from the same ledger, answers the earning question.
The formal Statement of Cash Flows — operating, investing, financing, indirect method — sits in Accounting with a self-check proving the three sections tie to the cash accounts.
See it in your own numbers.
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