The main difference between accounting on a cash or accruals basis is the time when liability to pay GST occurs.
If you elect to account on a cash basis then you are liable to pay GST once you have received it from your customers. At the same time, you cannot claim GST credits until you have paid for your products/services. For example, if you invoice a customer on Monday and receive payment on Friday then the incomes is recorded in your books against Friday’s date.
Should you select to account on an accruals basis, you have the legal duty to recognise GST once invoiced, though you may not have received or made payment for the goods and services as yet. For example, if you invoice a customer on Monday but don’t receive payment that day, you will nonetheless record the income against Monday’s date.
A cash basis is the most common choice.
This information is of a general nature only and does not constitute professional advice. You must seek professional advice in relation to your particular circumstances before acting.
Updated — Jul 7, 2017