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Cash Basis accounting is a very straight forward, single-entry approach that can work for small businesses that do not have too many accounts or financial transactions to manage nor do they maintain large amounts of assets.

Some of the few advantages for this approach is that since it is a straightforward, you receive cash for products sold or service rendered with minimal delay in between transactions, bookkeeping is simple enough that anyone can understand which eliminates the need to a trained bookkeeper or accountant (Business-Case-Analysis.com). This works well for sole proprietorship operating businesses if there are no financial statement requirements to be published. It makes it easier for the business to keep tract of their revenues within a few transactions since it only records when cash is received or expenses are paid. Cash accounting ensures that taxes are not paid on monies that have not yet been received; this improves cash flow and ensures that funds are available for tax expenditures. (Mysmp.com).

Some of the disadvantages using cash basis is since it is a single entry, vice double entry, there is more room for error unlike accrual where double entry is used, every credit is in direct relation to every debit, there is a way to verify entries. Also, since it can only record revenues when cash is received or expenses are paid, it does not have to ability to account for promissory notes and accounts receivable. This significantly lowers their possibility for bigger revenue since they can only record actual movement of cash when it happens. This simplicity also works against the business, Because cash accounting is so simple, it does not allow for tracking the actual dates of sales and purchases. Additionally, it usually does not provide a means of matching these transactions to specific items of inventory (Mysmp.com). Because this approach can only record actual movement or revenue when it happens, the balance sheet could be inaccurately recorded and could contribute to errors leading to missed payments of monies owed or missed revenues owed to them.

Reference:

https://www.business-case-analysis.com/cash -basis-accounting.html

www.mysmp.com/fundamental-analysis/cash-accounting.html