Cash accounting is an accounting method that records transactions only when cash actually changes hands—revenues when money is received, expenses when payments are made. This contrasts with accrual accounting, which records revenues when earned and expenses when incurred regardless of when cash moves. Cash accounting is simpler but provides a less complete financial picture because it does not capture amounts owed to or by the organization. Most municipalities use accrual accounting for financial statements (as required by accounting standards) but may use cash-based budgeting in some contexts. Understanding the accounting method helps interpret financial information correctly.