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When transactions are recorded varies between the cash basis of accounting and the accrual basis. In cash basis accounting, transactions are recorded when cash is received or paid. This implies revenue and expenses are recognized when payment is received and made, respectively. However, accrual basis accounting records transactions as they occur, regardless of cash exchange. Regardless of cash flow, revenue and expenses are recognized as earned and incurred. The best technique depends on a business's needs. The cash basis is simpler and easier to grasp since it immediately represents cash inflows and outflows. It may be suited for small enterprises or individuals with simple transactions who prioritize cash flow. The cash basis does not evaluate revenue or expenses until cash is exchanged, therefore it may not give a complete picture of a company's financial health and performance. However, accrual basis accounting more accurately portrays a company's financial condition and performance. The accrual basis matches the matching principle by recognizing revenue when earned and expenses when spent, independent of cash flow. It improves financial performance analysis and tracking for enterprises. Accrual accounting gives a more complete perspective of revenue, expenses, and financial performance, making it ideal for bigger firms or those that need precise financial reporting and analysis.