* Revenue recognition when cash is received: Revenue is recognized only when cash is actually received, regardless of when the goods or services were delivered.
* Expense recognition when cash is paid: Expenses are recognized only when cash is paid out, regardless of when the expense was incurred.
* Simplicity: It's generally simpler to implement and understand than accrual accounting.
* Suitable for small businesses: Often used by small businesses with limited transactions.
* Potential for mismatched revenue and expenses: This can lead to a less accurate reflection of profitability compared to accrual accounting.
* Non-GAAP compliance (generally): While there are exceptions, it's usually not compliant with Generally Accepted Accounting Principles (GAAP) for larger businesses.
In short, the core principle is that transactions are recorded when cash changes hands.