The top three methods used to perform the process of bookkeeping are as follows:
Hybrid Method: The hybrid method combines elements of both accrual and cash basis accounting. Businesses using this method can track income based on the cash basis but expenses on the accrual basis, or vice versa. It offers flexibility, allowing companies to leverage the benefits of both methods, though it can be more complex to implement.
Accrual Basis: Accrual basis accounting recognizes income and expenses when they are earned or incurred, regardless of when payment is made or received. This method provides a more accurate picture of a company’s financial health over longer periods, but can be more complex than the cash basis.
Cash Basis: Cash basis accounting records transactions when cash is exchanged. Income is recognized when received, and expenses are recognized when paid. This method is simpler and provides a clear picture of cash flow, but may not reflect long-term financial health as accurately as the accrual basis.