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The difference between cash and accrual methods of accounting lies inwhenincome and expenses are recorded. With cash method accounting, income and expenses are recorded when cash is actually collected or distributed. On the other hand, with an accrual accounting method, income and expenses are recorded when they are incurred–not when they are paid or collected.
Accounts payable is money you owe to vendors (aka liability). Record accounts payable when you purchase something without paying right away. Accounts receivable is money owed to your business (aka asset). Record accounts receivable in your books when customers purchase something from you on credit.
1) Analyzing financial transactions and assigning them to specific accounts
2) Writing original journal entries that credit and debit the appropriate accounts
3) Posting entries to ledger accounts
4) Adjusting entries at the end of each accounting period