Cash basis accounting
Under the cash basis, income and expenditure are accounted for when payment is received or made.
For unincorporated businesses, this is the default accounting basis for the purpose of income tax to HMRC. However, they can opt to use accruals basis by ticking the relevant box when doing their income tax return.
Limited companies cannot use the cash basis and must use the accruals basis.
Accruals basis accounting
Under the accruals basis, income is accounted for when it is earned, and expenditure is accounted for when it is incurred, regardless of when payment is received/made.
For example, if you sell goods to a customer in March 2026 but they do not pay you until June 2026, the income is accounted for in March 2026.
Limited companies must use the accruals basis. VT Cash Book operates under the cash basis only. If your business is a limited company, or an unincorporated business that has opted to use the accruals basis, you must use VT Transaction+ and not VT Cash Book.
