**Cash Basis of Accounting:**

Cash basis of accounting is a method of recording financial transactions based on actual cash inflows and outflows. Under this method, revenue is recognized when cash is received, and expenses are recognized when cash is paid. It focuses on the actual movement of cash rather than the timing of transactions.

**Accrual Basis of Accounting:**

Accrual basis of accounting is a method of recording financial transactions based on the recognition of revenues and expenses when they are earned or incurred, regardless of the timing of cash inflows and outflows. It aims to match revenues with the expenses incurred to generate those revenues, providing a more accurate representation of the financial position and performance of a business.

**Differences between Cash and Accrual Basis:**

1. **Timing of Recognition:**
- Cash Basis: Revenue and expenses are recognized when cash is received or paid.
- Accrual Basis: Revenue and expenses are recognized when earned or incurred, regardless of cash flow.

2. **Matching Principle:**
- Cash Basis: No consideration for matching expenses with the related revenue.
- Accrual Basis: Expenses are matched with the revenue generated in the same accounting period.

3. **Financial Statements:**
- Cash Basis: Results in a simplified financial statement with limited information.
- Accrual Basis: Provides a more comprehensive financial statement, including accounts receivable, accounts payable, prepaid expenses, and accrued liabilities.

4. **Accuracy of Financial Position:**
- Cash Basis: May not accurately reflect the financial position and performance of a business due to timing differences.
- Accrual Basis: Provides a more accurate representation of the financial position and performance by recognizing revenues and expenses when they are earned or incurred.

5. **Complexity and Compliance:**
- Cash Basis: Simpler to understand and implement, suitable for small businesses.
- Accrual Basis: More complex and requires adherence to accounting standards, suitable for larger and more complex businesses.

6. **Tax Implications:**
- Cash Basis: Taxes are paid based on actual cash inflows and outflows.
- Accrual Basis: Taxes may be based on recognized revenues and expenses, even if cash has not been received or paid.

In conclusion, the major difference between cash basis and accrual basis of accounting lies in the timing of revenue and expense recognition. Cash basis focuses on cash flow, while accrual basis emphasizes the matching principle and provides a more comprehensive and accurate representation of a business's financial position and performance.