Define 'cash accounting'.

Cash accounting is an accounting method that records revenues and expenses only when cash is exchanged. This contrasts with the accrual accounting method, which recognizes revenues when earned and expenses when incurred, regardless of when cash is actually received or paid.

The focus of cash accounting is on the actual cash flow of the business, making it particularly useful for small businesses or individuals who want to monitor their cash transactions closely. With cash accounting, a business would recognize revenue when it receives payment rather than when the sale occurs, and it would record expenses only when payment is made for goods or services received. This method provides a clear picture of how much cash is available at any one time, which can be beneficial for managing day-to-day operations.

Other definitions provided in the options do not accurately capture this focus on cash transactions, making the selected definition the most appropriate.