Association Urges Ways and Means Committee Chairman to Revise Draft Tax Proposal to Continue Permitting Small Businesses to Use Cash Basis Accounting
November 21, 2013
The ADA this week urged
Rep. Dave Camp (R-Mich.), chairman of the House Ways and Means Committee, to revise his draft tax reform proposal to retain the provision in the tax code allowing small businesses with $5 million or less in gross receipts to use a cash basis of accounting.
Cash accounting is simpler and requires less bookkeeping than the accrual method, which is why many small businesses, including dental practices, prefer to use it. In a cash accounting method, income and expenses are recorded only when funds are received or disbursed.
In accrual accounting, income is recorded when a sale is made, not when payment is received. Expenses are recorded when services or goods are received, not when they are paid.