Correct interpretation of cash basis of accounting

CA Prateek Garg (CA in Practice) (1447 Points)

17 June 2014  

I am confused about the correct interpretation of "CASH BASIS of ACCOUNTING". Which one of the following 2 interpratations is correct.

  1. Revenue/Costs should be recognised in the period in which cash is received/paid irrespective of perioed of accrual of such revenue/cost.
  2. Revenue/Costs should be receognised in the period in which receipt as well as accrual of reveue/costs is complete.

Kindly provide your opinion???