What accounting basis recognizes expenditures at the time payment is made?

The cash basis of accounting recognizes expenditures at the moment payment is made, which means that financial transactions are recorded only when cash changes hands. This method simplifies the accounting process, as expenses and revenues are tracked based on actual cash flow rather than when they are incurred or accrued.

For example, if an assisted living facility pays a utility bill in January for services used in December, the expense would be recorded in January under the cash basis. This approach helps organizations maintain a clear perspective on their cash position since it focuses solely on cash inflows and outflows.

In contrast, the accrual basis of accounting would recognize the expense in December when the service was used, regardless of when the payment was made. The deferred basis and historical cost basis concepts deal with different aspects of accounting, such as timing and the valuation of long-term assets, respectively, rather than the timing of cash payments. This specificity makes the cash basis particularly useful for smaller organizations or those with straightforward financial transactions.