The cash accounting regime has been optional for small, unincorporated businesses since 6 April 2013.
ACCA UK’s Guide To… Accounting Using the Simplified Cash Accounting Regime can be shared with clients to help them understand this in more detail.
Clients will hear about the cash basis from a variety of sources and, accordingly, practitioners will need to consider advising them whether cash accounting is the right approach for their business.
Those in favour of simplified cash accounting treatment argue that:
However, those opposing the simplified cash accounting treatment argue that:
In conclusion, cash accounting is designed for unincorporated small businesses.
For some clients, it may give a similar result to accrual accounting. But, for other clients, accrual accounting may help them to run their businesses on a more sound financial footing.
What is clear is that clients will need to be informed of the option.
To download the ACCA guides, visit the 'Related documents' section on this page.
Cash accounting may require a change to your engagement letters.