Cash accounting records income when received and expenses when paid. Simpler than accrual accounting but can misstate period income when timing of receipts or payments differs from when amounts were actually earned.
Cash accounting is common for smaller LA multifamily owners and for tax reporting purposes. Income recognized when deposited; expenses when paid. Can produce timing distortions — December rent received January 2 shifts to next year under cash method.
For LA multifamily valuation analysis, cash-based operating statements should be adjusted for timing to approximate accrual NOI. Sellers providing cash-basis statements without reconciliation risk buyer suspicion of timing manipulation.
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