If submitting their annual financial report to the ACNC, charities will use either cash or accrual accounting.
The main difference between cash and accrual accounting is the timing of when revenue and expenses are recognised in the books.
Cash accounting records revenue when money is received and expenses when money is paid out. Accrual accounting records revenue when it is earned and expenses when they are incurred.
Therefore, cash accounting does not record payables and receivables, while accrual accounting does.
Small charities have the choice to use either cash or accrual accounting if submitting a financial report. Medium and large charities must use accrual accounting when submitting their financial report