Accrual Accounting
Accrual accounting records economic events when they occur, not simply when cash is received or paid.
Accrual and cash accounting concepts governing when revenue, expenses, assets, and liabilities are recognized.
Accrual Accounting records economic activity when recognition requirements are met, even when cash moves in another period. Cash Accounting focuses on receipts and payments and can produce different timing.
The Expense Recognition Principle covers costs consumed, allocated, accrued, or recognized immediately. Revenue recognition is governed separately by the applicable rules, even though revenue and related costs may affect the same performance analysis.
When comparing methods, trace the underlying asset or liability and reconcile profit with cash flow. A payment does not automatically create an expense, and an unpaid amount can still be an expense and liability.
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Accrual accounting records economic events when they occur, not simply when cash is received or paid.
Cash accounting records income and expenses mainly when money is received or paid, rather than when the underlying economic activity occurs.
How accrual accounting recognizes costs when assets are consumed or liabilities arise rather than simply when cash is paid.