Cash-based accounting

[Doug Laidlaw]

Sorry to ask a very general accounting question.  Perhaps somebody can point 
me to a good resource?

I am a retired Solicitor.  In about 1970, our Courts ruled, in a case 
involving accountants, that accountants and solicitors in Australia must use 
revenue-based accounting  for income tax purposes.  (Barristers are still 
allowed to be cash-based.)  At that time I was working for a sole 
practitioner who had been using cash-based accounting.  He had to convert.  
In practice, revenue-based accounting is all that I have known.

My daughter helped my wife set up a Windows program for her to keep the home 
books on, a system very like an electronic cash journal.  My daughter, who 
has a Bachelor of Business degree, claims that on a cash receipts basis 
nothing is entered in the books until the monthly bank statement comes in - 
_then_ we chase back through the cheque book to find what a particular debit 
was for, and only enter what is on the statement.  That makes a Bank 
reconciliation totally unnecessary, except as a test for completeness.  It 
sounds a stupid method to me, and conflicts with the manual, but I can't 
argue with a B.Bus., especially my own daughter.  Her husband is a tradesman, 
and I believe that under the above Court decision, he is still entitled to 
keep his books and lodge his return on a cash basis.  

I would enter each transaction as it occurred and reconcile it à la Quicken or 
Gnucash.  At a later date, we may wish to derive tax figures from the data, 
but it is only wages and investments.  The tax difference is irrelevant.

Which one of us doesn't know what he/she is talking about?

TIA,

Doug.