Shadowing Practice: Cash vs Accrual Accounting Explained Simply | With Examples & Journal Entries - Learn English Speaking with Video

Choose a practice mode

Each mode opens a full-screen practice room.

116 sentences

If sentences are too short or too long, click Edit to adjust them.

Cash accounting or accrual accounting?

What's actually the difference?

And why can a business report revenue of $10,000 when it hasn't even received the $10,000 from its customer?

Or, even more confusingly, how can a business receive $10,000 into its bank account but not recognise that $10,000 is revenue yet?

The answer comes down to one of the most important concepts in accounting.

Timing.

Cash accounting follows when cash is actually received or paid.

Accrual accounting looks at when revenue is earned and expenses are incurred, regardless of when the related cash moves.

And once you understand that distinction, concepts such as trade receivables,

trade payables, accruals, prepayments and deferred revenue become much easier.

In this video, we're going to start from the very beginning.

We'll look at cash accounting, accrual accounting, who can use each method, the major differences between them, and then we'll work through practical examples.

We'll also look at the double entries for accruals and prepayments.

So let's start with the simplest possible difference.

Cash accounting follows the cash.

Under cash accounting, the timing is relatively straightforward.

Revenue is generally recorded when the cash is actually received, and expenses are generally recorded when they're actually paid.

Let's look at a self-employed consultant.

He completes some work for a customer in March, but the customer doesn't actually pay him until April.

Under a straightforward cash basis approach, we follow when the money is received.

So although the work was completed in March, the revenue is recognised in April, when the cash comes into the business.

So notice the timing.

Work completed in March, cash received in April, revenue recognised in April.

Under cash accounting, the completion of the work isn't what triggers the recognition of the revenue.

We move forward to April.

That's when the customer actually pays us.

and that's when the revenue is recognised under the cash basis.

So with cash accounting, the accounting period can be driven by when the money moves, rather than when the underlying work takes place.

Now let's look at the other side – expenses.

Consultant receives an electricity bill in March, but he doesn't actually pay

that bill until April under a straightforward cash basis approach we again follow the cash

so the expense is generally recognized in April

when the payment is made it's the same basic principle as our revenue example for revenue we looked at

when the cash came in for expenses we're looking at when the cash goes out.

So this gives us a very simple way to remember cash accounting.

Cash comes in, recognise the revenue.

Cash goes out, recognise the expense.

That's why cash accounting is much easier for a small business owner to understand.

We're largely following what's actually happening in the business bank account

rather than making a series of accounting adjustments to move revenue and expenses between periods.

One of the biggest advantages of cash accounting is simplicity.

We don't have to ask as many questions about which accounting period an unpaid amount belongs to.

For a straightforward transaction, we're primarily asking, when did we receive the money?

Or, when did we pay the money?

And because we're following actual cash movements, there are generally fewer of the period end adjustments that we associate with accrual accounting.

That's one reason the cash basis can be easier for eligible small unincorporated businesses to maintain.

Now let's look at accrual accounting.

Under accrual accounting, we record transactions in the accounting period in which their economic effects occur,

even if the related cash is received or paid in a different period.

So let's return to our consulting example.

After accrual accounting, revenue is recognised when it is earned, not necessarily when the cash is received.

So, if the service is completed and the revenue is earned in March, we recognise the revenue in March, even if the customer doesn't pay until April.

The cash can arrive later.

That's the fundamental difference.

The timing of cash does not necessarily determine when revenue is recognised.

Let's look at the double entry.

We've completed the service in March and earned $1,000, but the customer is going to pay us in April.

So in March we recognise the revenue.

Also, we recognise an asset called a trade receivable.

The entry is Debit Trade Receivables, $1,000 and Credit Revenue, $1,000.

Revenue increases on the credit side and the trade receivable is an asset because the customer owes the business money.

So we've recognised revenue now and cash later.

Now we move into April and the customer finally pays the $1,000.

We don't recognise another $1,000 of revenue as we've already recognised it in March.

We post debit bank and credit trade receivables $1,000.

Our bank asset increases and our receivable asset decreases because the customer no longer owes us the money.

So we're effectively converting one asset, the receivable, into another asset, cash.

There is no additional revenue.

Accrual accounting works on the expense side as well.

Imagine the business uses $600 of electricity during December.

The electricity belongs to December, but the bill won't be paid until January.

Under accrual accounting, we don't wait until January to recognise the expense.

The electricity was consumed in December, so the expense belongs to December.

At 31st December, we record debit electricity expense $600 and credit accruals.

The debit records the expense in the statement of profit or loss.

The credit creates a liability in the statement of financial position because the business has an amount to pay.

Now let's look at how we calculate an accrual.

Suppose our year-end is 31st of December.

We've used electricity during November and December but we haven't received the electricity bill yet.

Under accrual accounting, we can't simply leave the expense out because the bill hasn't arrived.

The electricity has already been used, so the expense has been incurred and must be recognised in the period it relates to.

We estimate that the electricity cost for November,

December and January will be $1,200 and assume the cost is spread evenly across those three months.

That's $400 per month.

November and December belong to this accounting year.

Two months multiplied by $400 gives us an expense of $800 for the current period.

January belongs to the next accounting period.

So if the $800 has not already been recognised,

our year-end adjustment is debit electricity expense, $800, and credit accruals, $800.

So remember, if an expense has been incurred but hasn't yet been recorded

because the bill hasn't been received we need to recognise an accrual.

Now let's look at the prepayments.

Suppose on October 1st the business pays $12,000 for 12 months of insurance.

That's $1,000 per month.

Our year end is 31st December.

October November and December insurance have actually been consumed

so the expense for this accounting period is $3,000

but we've already paid $12,000 the remaining $9,000 relates to future accounting periods that's a prepayment

and a prepayment is an asset

100

if the whole $12,000 was initially charged to insurance expense our adjustment is debit prepayment $9,000

101

and credit insurance expense $9,000 we're removing the future portion from the current year's expenses

102

and carrying it forward as an asset let's look at deferred revenue

103

when customer pays in advance a customer pays us $6,000 in advance for six months of services cash received

104

and revenue earned are not necessarily the same thing under accrual accounting.

105

If we haven't yet provided the services, we still owe something to the customer.

106

So initially, debit bank, $6,000 and credit deferred revenue, $6,000.

107

As we provide the service, the liability reduces and revenue is recognised.

108

If the service is appropriately recognised evenly over six months, that's $1,000 per month.

109

So each month, debit the liability, $1,000, credit revenue, $1,000.

110

Now notice how different this is from cash accounting.

111

The $6,000 entered the bank, but that does not mean $6,000 of revenue was earned immediately.

112

There are four timing patterns worth remembering.

113

Accrued expense, expense now, pay later, usually a liability.

114

Pre-payment, pay now, expense later, an asset.

115

Accrued revenue, earn the revenue now, receive the cash later, an asset.

116

And finally, deferred revenue, receive the cash now, earn the revenue later, a liability.

Download App

Everything you need to speak fluently

AI PronunciationScore every sentence

IPA PracticeMaster every sound

VocabularyBuild your word bank

Vocab GameLearn while playing

Scan QR

Download on theApp Store Get it onGoogle Play

📺 Same Channel

Bookkeeping and Accounting Course for Beginners | From Basics to Trial Balance

Business EnglishUniversity StudentsWorking Adults

✨ Recommend Video

151 sentences

Trade Liquidity Like the Pros: Stop Guessing Entries With Inducement and Market Structure

Daily ConversationWorking Adults

123 sentences

Order-to-Cash Process in SAP SD – Step by Step (Full Beginner Guide 2025)

Business EnglishUniversity StudentsWorking Adults

Why This Video Is Perfect for English Speaking Practice

This video is a goldmine for english speaking practice—it’s clear, conversational, and packed with relatable examples. The host breaks down complex ideas (like cash vs accrual accounting) using simple, everyday language, making it easy to follow and mimic. The pacing is natural, not too fast, so you can keep up while practicing pronunciation and intonation. Plus, the topic involves common business terms, which is great for building vocabulary—whether you’re prepping for IELTS speaking practice or just want to sound more confident in professional settings.

Breaking Down Natural Speech Patterns

Let’s look at a few lines that showcase natural English flow: - “Cash accounting or accrual accounting? What's actually the difference?” The question structure here is casual and direct, using “actually” to emphasize curiosity—perfect for practicing conversational tone. - “So notice the timing. Work completed in March, cash received in April, revenue recognised in April.” Short, repetitive phrases help clarify ideas, and the pause after “timing” mimics how native speakers emphasize key points. - “That's why cash accounting is much easier for a small business owner to understand.” The phrase “that's why” connects ideas smoothly, a common linker in spoken English that makes your speech sound cohesive. These lines are easy to shadow and master, boosting your fluency quickly.

A Simple Shadowing Routine to Try Today

Use the shadowing technique with this video for quick progress:

Watch a 30-second clip, focusing on the host’s rhythm and stress (which words they emphasize).
Play the clip again, pausing after each sentence, and repeat it out loud—try to match the tone and speed.
Record yourself using a shadowing app (or even your phone) and compare it to the original. Notice small differences, like pauses or vowel sounds, and adjust.
Do this daily for 10 minutes, and you’ll soon notice your shadow speech sounding more natural. For extra challenge, try longer clips or mimic the host’s “thinking” pauses—they make your speech sound authentic!

Consistency is key—even 5 minutes a day with this video will sharpen your speaking skills. You’re not just learning accounting; you’re building the confidence to speak English clearly and fluently.

Grammar in this video

The structures the speaker uses most, with the exact words from the video:

Structure	In the video
Present perfect have/has + past participle — a past action that still matters now	hasn't even received · We've completed · we've recognised
Passive voice be + past participle — the focus is on what happens, not who does it	is actually received · is earned · is received

What is the Shadowing Technique?

Shadowing is a science-backed language learning technique originally developed for professional interpreter training and popularized by polyglot Dr. Alexander Arguelles. The method is simple but powerful: you listen to native English audio and immediately repeat it out loud — like a shadow following the speaker with just a 1–2 second delay. Unlike passive listening or grammar drills, shadowing forces your brain and mouth muscles to simultaneously process and reproduce real speech patterns. Research shows it significantly improves pronunciation accuracy, intonation, rhythm, connected speech, listening comprehension, and speaking fluency — making it one of the most effective methods for IELTS Speaking preparation and real-world English communication.

Shadowing technique: read the full step-by-step guide →

Shadowing Practice: Cash vs Accrual Accounting Explained Simply | With Examples & Journal Entries - Learn English Speaking with Video

Choose a practice mode

Download App

Bookkeeping and Accounting Course for Beginners | From Basics to Trial Balance

IAS 7 Statement of Cash Flows: Summary - applies in 2026

The Anatomy of Fraud

What are KPIs and Metrics? | Data Fundamental for Beginners

Warren Buffett: How To Analyze a BALANCE SHEET

OECD Transfer Pricing Guidelines 2022 - Chapter 1 - The Arm's Length Principle

What is Accounting ? An Introduction to Accounting.

Revenue Recognition ASC 606. Step 1: Identify the Contract.

Crypto Coin vs Token (Differences + Examples)

‘Buy Now, Pay Later’: A New Wave of Consumer Debt

ALL OF BUSINESS Explained in 20 Minutes