Don't understand imbalance

[Mike or Penny Novack]

Harold wrote:

> I don't record the credit card charges as I incur them. I don't use 
> liabilities and then pay them. As I understand accounting (not very 
> much) I am operating on a cash basis and therefore just pay the bills 
> when then come in and are due.
>
Confusion as to what is meant by "cash basis". Concepts like "accounts 
receivable" and "accounts payable" aren't limited to "accrual bookkeeping".

Perhaps the confusion is because you used the card for the purchase of 
physical goods of some sort? Try this example. Using your credit card, 
you go to an ATM and obtain money. You wouldn't think of this as if it 
were income, would you? Yes it's an increase in assets (cash in pocket) 
but it's also an increase in liabilities (credit card balance). When did 
you experience this increase in cash in pocket? When you took it from 
the ATM or when you later wrote a check to pay the credit card bill? It 
wasn't the same as if you waited to the date at which you later paid the 
bill, walked into the bank, and cashed a check was it?

The same with the expense side. You buy something with the credit card 
instead of with cash from pocket or check from checking account. You 
bought it when you bought it, not later when you paid the bill. In 
between you owed somebody cash.

Accrual bookkeeping is something else.