Taxation

Financial accounting:
Financial accounting is mostly known as accrual-based accounting. Under the accrual method, companies record sales revenues and purchase expenses, when they are earned and incurred, regardless of whether cash from sales has been collected and cash for purchases has been paid. To determine a sale or purchase transaction date for recording, companies need to ascertain the completeness of a sale or purchase. Unfinished delivery of goods or services and partially receiving from a purchase don't account for an earned revenue and incurred expense. Recording doesn't take place until the completion of the sale or purchase orders.
Tax accounting:
Tax accounting often is referred to as cash-based accounting, and thus focuses primarily on actual cash receipts and cash payments, rather than their related sale or purchase transactions. Companies don't record a sale or purchase transaction at the time of the transaction until cash is received or paid later. Small businesses with annual sales of $5 million or less may elect to use the tax accounting to help them better manage their cash positions, which hold more significance to a small business's survival than a larger company.