What is Basis Of Accounting?

Legal Definition
A basis of accounting can be defined as the time various financial transactions are recorded. The cash basis (EU VAT vocabulary Cash accounting) and the accrual basis are the two primary methods of tracking income and expenses in accounting.

Both can be used in a range of situations, from the accounts of a whole country, a large corporation, a small business or an individual. In many cases, regulatory bodies require individuals, businesses or corporations to use one method or the other. When this is not the case, the choice of which to use is an important decision, as both methods have advantages and disadvantages.
-- Wikipedia
Legal Definition
The way loss and gains are recognized by a firm and placed on a statement. The two styles are accrual and cash basis accounting.