Cash-Basis Accounting Explained
The platform uses cash-basis accounting to track your trading business finances. Understanding this concept helps you interpret your numbers correctly.
What Is Cash-Basis Accounting?
Cash-basis accounting is simple:
Income is recorded when you receive the money
Expenses are recorded when you pay the money
It's about when cash actually moves, not when you earn or owe it.
Cash-Basis vs. Accrual-Basis
There are two main accounting methods:
Cash-Basis (What This Platform Uses)
Income: When payment is received
Expense: When payment is made
Focus: Actual cash movement
Accrual-Basis
Income: When earned (even if not yet received)
Expense: When incurred (even if not yet paid)
Focus: When obligations arise
Example: You complete coaching services in January but get paid in February.
Cash-basis: Income recorded in February (when paid)
Accrual-basis: Income recorded in January (when earned)
Why Cash-Basis for This Platform?
Simplicity
Most individual traders don't need complex accrual accounting. Cash-basis is straightforward and easy to understand.
Reality-Based
Your Dashboard shows actual money that moved—not theoretical obligations. This gives you a realistic picture of cash flow.
Tax Alignment
Many individuals report taxes on a cash basis. The reports align with this common approach.
Prop Trading Fit
Prop trading is naturally cash-based:
Payouts arrive when approved
Challenge costs are paid upfront
It's all about actual cash movement
How It Affects Your Data
Payouts
A payout counts when marked "Approved"—meaning you've (essentially) received it. A "Requested" payout doesn't count yet.
Expenses
An expense counts when marked "Paid." An unpaid bill is tracked but doesn't affect your metrics.
Dashboard Calculations
Your Dashboard shows cash that actually moved during the selected period—Money In vs. Money Out.
Reports
Tax reports include only paid transactions. This matches the cash-basis approach.
Practical Implications
Your Numbers Are "Real"
When the Dashboard shows +$5,000 net result, that's $5,000 of actual cash that came in over what went out. No theoretical numbers.
Timing Matters
If you pay for a challenge on December 31st vs. January 1st, it affects which year the expense appears in.
Payment Status Is Critical
Marking something "Paid" or "Unpaid" determines whether it affects your metrics. Be accurate with status.
Month-End Might Not Match "Activity"
If you did a lot of work in March but payments came in April, March looks quiet and April looks busy. That's cash-basis in action.
When Cash-Basis Can Be Confusing
Lag Between Work and Payment
You might have a great trading month but low income if payouts haven't arrived yet.
Prepaid Expenses
If you pay annually for something, the full cost hits one month even though you use it all year.
Pending Payouts
Money you've requested but not received doesn't show in your totals.
Working With Cash-Basis
Don't Panic Over Single Months
One month might look negative due to timing. Look at 90-day or yearly trends for the real picture.
Track Pending Items
Use "Unpaid" status for income you're expecting. It won't affect metrics, but you'll see it in your list.
Record When Money Moves
Train yourself to add transactions when payments actually occur, not when you plan them.
Review Quarterly
Monthly views can be lumpy. Quarterly reviews smooth out timing variations.
Summary
Cash-basis accounting means:
Income counts when received
Expenses count when paid
Metrics reflect actual cash movement
It's simple, realistic, and well-suited for tracking a trading business.