Cash

Accrual vs Cash Accounting in Forex Trading: A Guide

5 min read

Accrual vs cash accounting is an important distinction when it comes to the rules and principles of Forex trading. Accrual accounting requires gains and losses to be recorded when a transaction occurs, rather than when payment is received, while cash accounting requires gains and losses to be recorded when payment is received. As a trader, what this means is that with accrual accounting you can record profits and losses on the day of a transaction, but with cash accounting you have to wait until the payment is received before accounting for profits and losses. This will affect how you manage your Forex trading strategy and how you plan for and react to potential profits and losses. By understanding the difference between accrual and cash accounting, you can have a better understanding of the risks and rewards associated with your trading decisions.