Annual basis of accounting is also known as accrual basis of accounting.Under the accrual basis of accounting,the receipt of cash and payment of cash are not the focus of reporting revenues and expanses.Rather the focus is :(1)what revenues were earned and (2)what expanses were incurred.Under the cash basis of accounting,revenues are not reported on the income statement untill the cash is received and expanses are not recorded till the payment is made.