Accrual vs. Cash Accounting: Why Most Non-profits Use Accrual Accounting
Thursday, July 23, 2026
When non-profit leaders review financial reports, one question often arises: Why do we use accrual accounting instead of cash accounting?
If you read our recent post on common accrual accounting mistakes, you may be wondering why accrual accounting matters so much in non-profit financial reporting. The answer lies in the unique way non-profits manage grants, restricted funds, receivables, and ongoing financial obligations.
Let's take a deeper dive into accrual versus cash accounting and why most non-profits rely on accrual-based financial reporting.
Cash vs. Accrual: What's the Difference?
Cash accounting records revenue when cash is received and expenses when cash is paid.
Accrual accounting records revenue when it is earned and expenses when they are incurred, regardless of when money changes hands.
Why Non-profits Typically Use Accrual Accounting
While cash accounting is often simpler, it doesn't always provide a complete picture of an organization's financial activity. For non-profits that rely on grants, reimbursements, pledges, and restricted funding, timing differences between when funds are earned and when they are received can make a significant impact on financial reporting. Cash moving in and out of the bank account doesn't always tell the full story.
For example, a non-profit may incur expenses for a grant-funded program in one month but not receive reimbursement until a later date. Under cash accounting, those expenses and the related funding could appear in different reporting periods, making it difficult to understand the true financial impact of the program.
Accrual accounting also allows organizations to track outstanding grant receivables, unpaid obligations, and other financial commitments that board members and leadership teams need to understand when making decisions.
For many non-profits, accrual accounting provides the transparency and accuracy needed for grant reporting, board oversight, budgeting, and long-term planning.
The Bottom Line
While cash accounting may be simpler, accrual accounting often provides non-profits with a more accurate view of their financial position and program activities. By recognizing revenue and expenses when they occur, organizations can improve reporting, strengthen grant compliance, and make more informed decisions.
If your non-profit has questions about accrual accounting, grant tracking, or financial reporting, contact J&S today. We're here to help you maintain accurate records and gain greater confidence in your organization's financial management.
About J&S Accounting
At J&S Accounting, we provide expert bookkeeping services tailored to the unique needs of small businesses and non-profits. We recognize the challenges that come with maintaining accurate financial records and how vital this is for the smooth operation and growth of your business. As a woman and minority-owned firm, we’re proud to offer our expertise to businesses in Savannah, GA, and across the nation, helping them navigate financial complexities and achieve better financial management.
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Disclaimer:This content is for information purposes only and should not be considered legal, accounting, or tax advice, or a substitute for obtaining such advice specific to your business from a professional accountant. Additional information and exceptions may apply. Applicable laws may vary by state or locality. No assurance is given that the information is comprehensive in its coverage or that it is suitable in dealing with a customer’s particular situation. J&S Accounting does not have any responsibility for updating or revising any information presented herein. Accordingly, the information provided should not be relied upon as a substitute for independent research. J&S Accounting does not warrant that the material contained herein will continue to be accurate, nor that it is completely free of errors when published. Readers and viewers should verify statements before relying on them.
© 2023 J&S Accounting. All Rights Reserved.
Disclaimer
This content is for information purposes only and should not be considered legal, accounting, or tax advice, or a substitute for obtaining such advice specific to your business from a professional accountant. Additional information and exceptions may apply. Applicable laws may vary by state or locality. No assurance is given that the information is comprehensive in its coverage or that it is suitable in dealing with a customer’s particular situation. J&S Accounting does not have any responsibility for updating or revising any information presented herein. Accordingly, the information provided should not be relied upon as a substitute for independent research. J&S Accounting does not warrant that the material contained herein will continue to be accurate, nor that it is completely free of errors when published. Readers and viewers should verify statements before relying on them.