Cash accounting is a straightforward accounting method where revenues and expenses are recorded only when cash is actually received or paid. This approach contrasts with accrual accounting, which recognizes income and expenses when they are earned or incurred, regardless of when cash transactions occur. Cash accounting is commonly used by small businesses due to its simplicity, providing a clear picture of cash flow. However, it may not accurately reflect a company’s financial position over time, as it ignores accounts receivable and payable.