The difference between cash and accrual basis accounting boils down to the recognition of transactions. In cash basis, you record a transaction when cash is received or paid. There is no other triggering event for the recording of a transaction in the cash basis of accounting. Because cash basis relies on the receipt or disbursement of cash, it can be very limiting as it relates to reporting purposes and cash basis financial statements can be very difficult to compare across different time periods.
Accrual basis does a much better job of providing a detailed accounting of the transactions of a business by providing a framework (generally accepted accounting principles or GAAP) which dictates the proper accounting treatment for just about every comp