As volunteer treasurer you need to understand the difference between cash and accrual accounting because this determines how you manage and maintain the financial records of your not for profit organisation.

Cash accounting records the transaction when you actually receive the money or make payment. 

For example, you may send out an invoice that is not paid for another 35 days.  You would actually record that amount as income when it enters you bank account.  It is the same with payments.  You may write out a cheque to pay an account but the actually expenditure is not recorded until the cheque is processed and the amount has been deducted from your bank account. This may be the following week or even 4 months later.

Accrual accounting records the transaction when you have earned the income or incurred the expense. 

For example, if you have sold a product or service you will record the income at that point in time even though you may not receive the actual income until much later.  With payments you will record the expenditure when you have incurred the expense even though you may not make payment until a later stage.  This is why, with accrual accounting, we have debtors for income transactions that are owed to us and creditors for expense transactions that we owe to other organisations.

In effect, accrual accounting is more of a real time accounting method as the financial information is recorded when the transaction occurs, whereas cash accounting is a delayed version of accounting as the financial information is often not recorded until after the transaction has occurred and the actual cash has either been received or paid which can occur at a later date.

Which system do you think our Admin Bandit hero Robin Hood would have used?

If it is all too hard, try the Admin Bandit accounting software for volunteer treasurers.  Our system and support will make the job easy.