In accounting, basis defines how you recognize your income and expenses for accounting and tax purposes. Accrual-based account is widely used for corporations, small and medium businesses. All public companies must use accrual accounting, and most businesses with employees start to use accrual accounting as banks and investors and others require it. The distinction is you recognize the income when you record it, not when the deposit hits your bank account. Similarly, you recognize expenses when you record it, not when the withdrawal hits your bank account or credit card. For example, if you send a client an invoice on Dec 20, 2019, and they send you the money (via Venmo, Zelle, ACH, check, etc.) on Jan 5, 2020, you would record that income for tax year 2019 since that’s when you sent the invoice.
