Accrual Accounting

Recognising income and expenses when they are earned or incurred, not when cash moves.

Area: Accounting
In this area: 52 terms of 262

Accrual accounting records a sale when goods are delivered and a cost when goods are received, regardless of payment date. It matches revenue to the costs that produced it in the same period.

This is why goods received but not yet invoiced must be accrued at period end. Without that entry, the stock is on the balance sheet but its cost is not, and profit is overstated.