When cash is actually received or spent, cash-based accounting records revenue and expenditures accordingly. However, accrual accounting records revenue when it is reasonably certain that it will be collected (i.e., when a customer has placed an order for the goods) and records expenses when they are incurred rather than when cash is actually spent.
Due to the widespread usage of credit cards and lines of credit for payment these days, most large organizations use accrual accounting; nevertheless, very small firms may choose to employ cash-based accounting in order to streamline their financial statements.