Accrual Accounting

Tax Glossary Definition

Accrual Accounting

Accrual Accounting – An accounting method in which revenues are recorded when earned and expenses when incurred, regardless of when cash is received or paid. This approach provides a more accurate representation of an entity’s financial performance and position. In contrast, cash accounting recognizes transactions only upon cash movement, which may create timing discrepancies in financial reporting.

Example: If a company delivers goods in March but receives payment in April, revenue is recorded in March under the accrual accounting method.

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