Timing is the main distinction
The cash movement and the business activity can occur on different dates. The accrual view helps place activity in the period to which it belongs. That makes outstanding invoices and unpaid bills important inputs to the accounts.
A report built only from bank transactions can therefore omit meaningful parts of a period's performance. The absence of a payment is not evidence that no cost or obligation exists.
A reporting example
Suppose a business completes work in June and receives the customer payment in July. Under an accrual approach, the income relates to June when earned, with a receivable until payment. This example does not establish the treatment of advance payments, incomplete work or a particular contract.
Cutoff decisions can need judgment. Provide the contract, invoice dates, delivery details and any deposits so the accountant can determine the appropriate treatment.
Discuss the method before changing it
Do not switch between cash and accrual reporting simply because one produces a preferred result. Tax rules govern the available methods and changes between them. A software report toggle does not establish an election or complete a tax adjustment.
When comparing periods, confirm that both use a consistent basis and that necessary closing adjustments have been recorded. Otherwise a timing difference can be mistaken for business growth or deterioration.
Sources & editorial notes
Sources checked October 23, 2026. The examples are illustrative and provide general information. Discuss how the guidance applies to your circumstances with your accountant.
- Accounting for your earningsCanada Revenue Agency
Rules and guidance can change. Use the current official source and confirm the treatment for your facts. To flag an error, contact Sora.