Accounting Methods are divided into two divisions based on when revenues and costs are recorded. Therefore, the total of the credit will always equal the total of the debits.
Accounting Methods are divided into two divisions based on when revenues and costs are recorded.
● Cash Basis
● Accrual Basis
Therefore, there are two different ways to record tax information on accounting transactions: cash basis accounting and accrual basis accounting. The main distinction between these two approaches is how and when the tax is recorded. Let's examine these two approaches.
1. Accrual Basis
The default accounting approach, known as the accrual basis, records tax information on revenues and costs as soon as they are generated. This method, which is included in Odoo17, is useful for immediately entering taxes in accounting ledgers and tax returns.
2. Cash Basis
Tax on revenue or expenses is reported using the cash basis method after receiving payment in cash from clients or after paying suppliers in cash. In this instance, the revenue tax is only recorded at the time when the payments are received. Additionally, expenses are only reported after suppliers or employees have been paid. From the Accounting Configuration Settings, the Cash Basis option can be enabled. Taxes that can be generated in conjunction with an invoice or payment using the same technique will also be impacted by cash-based accounting.