What are the contents of a cash basis balance sheet?

Under the cash basis of accounting, you only record transactions where there is a related change in cash. This means that there are no accounts receivable or accounts payable to record on the balance sheet, since they are not noticed until such time as they are paid by customers or paid by the company, respectively. The following bullet points discuss the accounting methodologies under which different types of line items are included in the balance sheet. The methodologies noted are:

• Cash basis accounting. Record transactions only when there is a change in cash.
• Modified cash basis accounting. The same as the cash basis, except that long-term assets and liabilities are included in the balance sheet.
• Accrual basis accounting. Records revenues and expenses as they are earned or incurred, irrespective of changes in cash.

The balance sheet contents under the various accounting methodologies are:

• Cash and investments. Contains the same information under cash basis, modified cash basis, and accrual basis accounting.
• Prepaid expenses. Not used for the cash basis or modified cash basis, since these items are charged to expense. Used under the accrual basis.
• Accounts receivable. Not used for the cash basis or modified cash basis, since no transaction is considered to have occurred until the customer pays. Used under the accrual basis.
• Inventory. Not used for the cash basis or the modified cash basis, since these purchases are charged directly to expense; however, many cash basis companies prefer to include it. Used under the accrual basis.
• Fixed assets. Not used for the cash basis, but is used under the modified cash basis. Also used under the accrual basis.
• Accounts payable. Not used under the cash basis or modified cash basis, since no transaction is considered to have occurred until the company pays its suppliers. Used under the accrual basis.
• Accrued expenses. Not used for the cash basis or modified cash basis. Used under the accrual basis.
• Loans. Not used for the cash basis, though some companies prefer to include it. Used under the modified cash basis and accrual basis.
• Common stock. Used under the cash basis, modified cash basis, and accrual basis.
• Retained earnings. Used under the cash basis, modified cash basis, and accrual basis.

The exact number of inclusions and exclusions used for the balance sheet under the cash basis is really up to the user; the cash basis is not supported by any accounting standards, so the exact structure of the balance sheet is decided by common usage. Thus, you will see a variety of alternative formats for the cash basis that may include additional line items, such as inventory and fixed assets.

Related Topics

Accrual basis accounting 
Accrual basis to cash basis conversion 
Cash basis accounting 
Cash basis to accrual basis conversion 
Modified cash basis