What is the cash basis of accounting primarily characterized by?

The cash basis of accounting is primarily characterized by recording revenues when cash is received and expenses when cash is paid. This approach focuses solely on cash transactions, meaning that no revenue is recognized until the actual cash is put in hand, and expenses are only recognized when they are paid.

This method provides a straightforward way of tracking cash flow and is often easier for small businesses and individuals who operate on a cash basis. It reflects the liquidity of the business, as it only recognizes transactions that impact cash. This is distinct from the accrual basis of accounting, where revenues and expenses are recorded when they are incurred, regardless of cash flow, offering a different perspective on financial performance and obligations.

While other approaches may focus on aspects like real-time recording or projected revenues, these do not define the cash basis specifically, highlighting its unique focus on actual cash transactions.