Cash basis vs Accrual basis of accounting

There are two methods of recording accounting transactions
1.Accrual basis
2.Cash basis

Accrual Basis
 Large businesses use accrual bases for recording transaction. In accrual basis, transaction will be recorded when it occur. e.g

(1)A person sales goods for Rs.100,000 on credit basis to Mr. Amir as on 1st January 2017
(2) He receives  cash for Rs.100,000 from Mr. Amir as on 10th January 2017

In this case the following entries will be passed
(1)
       01.01.2017                     Mr.Amir Account                   100,000               Dr.
                                                          Income Account                    100,000                 Cr.

(2)
        10.01.2017                   Cash Account                         100,000                Dr.
                                                          Mr. Amir Account                 100,000                  Cr.


You can see that the net effect of the above entry will be:

      (1) Cash account                        Dr.
                      Income Account                     Cr.



Cash Basis
 Normally small businesses use cash basis of accounting.Under this method the transaction will be recorded when cash will be paid or received.e.g Take the above example of Mr. Amir for consideration. The following entries will be passed under cash basis.

(1) No entry will be passed as on 1st January 2017 as no cash is involved.

(2)
10.01.2017                        Cash Account                        100,000    Dr
                                                      Income Account                  100,000                  Cr.