An accounting basis that recognizes revenue when performance obligations are satisfied and expenses when they are incurred, regardless of when the related cash flows take place. Most entities use accrual basis accounting to prepare financial statements, but some smaller companies (and the majority of individual taxpayers) use the simplified Cash basis of accounting, which is an accounting basis that recognizes revenues when the cash is received from customers and expenses when paid to suppliers. When cash basis accounting is used to prepare financial statements, no adjusting entries are recorded, meaning all entries have their origin in the cash receipt and payment journals.