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Basis of Accounting Explained | Cash vs Accrual Basis | Class 11 Accounts — Full Concept

Confused about Cash vs Accrual basis? In this full concept video for Class 11 Accounts, I explain both bases in a simple, exam-focused way — definitions, effects on profit & financial statements, journal entries, adjusting entries, solved numerical examples, and quick exam tips. By the end you’ll be able to answer theory questions and solve numerical problems confidently.


✅ What you’ll learn in this video

Clear definitions: Basis of Accounting, Cash Basis, and Accrual Basis

How each basis treats revenue and expenses

Impact on Profit and Financial Statements (P&L & Balance Sheet)

Journal entries and adjusting entries under accrual method

Several solved numerical examples (step-by-step)

Exam tips: how to answer marks-based questions for CBSE/Class 11


🔎 Quick summary

Cash basis: record transactions only when cash is received or paid.

Accrual basis: record incomes when earned and expenses when incurred — whether or not cash has been exchanged.

Why accrual matters: gives a correct picture of performance and financial position (matching principle).


✍️ Numerical examples (explained in video)

Example 1 — Simple timing difference

Revenue earned in Dec: ₹50,000 (cash received later)

Expense incurred in Dec: ₹20,000 (paid later)

Accrual basis profit for Dec: ₹50,000 − ₹20,000 = ₹30,000

Cash basis profit for Dec: 0 − 0 = ₹0


Example 2 — Mixed cash & credit transactions

Cash sales = ₹80,000

Credit sales = ₹40,000

Cash purchases = ₹10,000

Credit purchases = ₹25,000


Calculations:

Revenues (accrual) = 80,000 + 40,000 = ₹120,000

Expenses (accrual) = 10,000 + 25,000 = ₹35,000

Profit (accrual) = 120,000 − 35,000 = ₹85,000

Revenues (cash) = ₹80,000

Expenses (cash) = ₹10,000

Profit (cash) = 80,000 − 10,000 = ₹70,000


You’ll see how profit differs based on the basis of accounting — we work these out step-by-step in the video.


📝 Exam tips (Class 11 / CBSE)

Always write the definition first (short & precise).

For difference-type questions, use a small 2–3 point table (Heading, Cash, Accrual).

For numerical problems, show working steps (how revenue and expenses are recognized).

If a question asks “Which basis will you use?” explain why (matching, prudence, reliability).

Remember: Final accounts normally use accrual basis unless the question states otherwise.


▶️ If you liked this video

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Comment below — which example did you find hardest? I’ll answer the top questions in the next video.


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