Stressed by tax?
Get Earnr Pro

Traditional Accounting

[trəˈdɪʃənl əˈkaʊntɪŋ]



Traditional Accounting is a type of accounting where revenue and expenses are recorded when the transaction occurs rather than when invoices are paid.

More detail:

Traditional Accounting, also known as accural accounting, is a method of accounting where every invoice that is received and sent is recorded, regardless of the invoice's paid status.

This method then calculates Profits using these invoices. This is different to Cash Basis accounting where profit is calculated using transactions where the cash has already changed hands.

Traditional Accounting provides a more accurate picture of the company's financial situation than Cash Basis but it is often much more complicated to managed for Sole Traders and small businesses.

A Self-employed individual can use Cash Basis accounting if they have a turnover less than £150,000. Otherwise, they must use Traditional Accounting methods.

Back to Taxionary

You might also like...

decorative image for a blog

What is IR35 and do I need to worry about it?

There are loads of different tax laws in the United Kingdom. IR35 is very important to freelancers and contractors but can be a little confusing. Here, we explain simply what IR35 is and who it can affect.

Read more
decorative image for a blog

Flat rates for mileage vs actual expenses. What is better?

Self-employed individuals can use two different methods to expense business vehicle costs. Here, we investigate the positive and negatives for both methods and which one might be right for you.

Read more
decorative image for a blog

What is the EIS and how does it work?

If you are looking to invest in small and medium sized businesses, the Enterprise Investment Scheme (EIS) provides lots of tax reliefs for doing so. Here we discuss what it is and how it works.

Read more
Earnr logoDownload earnr