This method only records transactions when you spend or receive money. It does not record accounts receivable or accounts payable, but does record checks and cash spent and received.
For tax purposes, there are definite advantages to the cash accounting basis for accounting. Cash accounting ensures that taxes are not paid on monies that have not yet been received; this improves cash flow and ensures that funds are available for tax expenditures. This can be especially important for individuals and small businesses where cash flow may be restricted at certain times. For companies that do a great deal of cash business and do not maintain large inventories, cash accounting is a convenient and reliable way of tracking expenses and profits without necessitating a great deal of bookkeeping.