is wherein revenue and expenses are recorded in the period in which they are earned or incurred regardless of whether cash is received or disbursed in that period. This is the accounting basis that generally is required to be used in order to conform to generally accepted accounting principles (GAAP) in preparing financial statements for external users.
As opposed to “Cash method” or “Cash basis,” a method of accounting applied for tax purposes. The method of tax accounting used determines when a transaction has significance for tax purposes. Under the accrual method, a transaction is taxed when the taxpayer “accrues” an obligation to pay or a right to receive a payment is created. In the case of a service business, for example, income tax would be payable in the year during which services are rendered, as opposed to the year when payment is actually made (as would be the case under the cash method). The accrual method is used by most businesses. Smaller businesses use the cash method.
A basis of budgetary accounting in which revenue is recorded when earned and expenditures are recorded when obligated, regardless of when the cash is received or paid.
A method of accounting in which revenues are recognized in the period earned and costs are recognized in the period incurred, regardless of when payment is received or made.
method of recording transactions by which revenues and expenditures are reflected in the accounts of the period in which they are considered to have been earned and incurred, whether or not all transactions have been finally settled by the recipient or payment of cash or its equivalent. 3.4.3
The effects of transactions and other events are recognised when they occur (and not as cash or its equivalent is received or paid) and they are recorded in the accounting records and reported in the financial statements of the periods to which they relate.
A system of accounting that recognizes the effect of transactions when they occur rather than when the related cash is paid or received.
A system of accounting which consists of recognizing in the books and records of the accounting entity the significant and accountable aspects of financial transactions or events as they occur. That is, to recognize revenues when earned and expenses when incurred. For a more detailed discussion of this accounting practice, see DoD 6010.13-M (reference (a)).
A method of earnings determination under which revenues are recognized in the accounting period when earned, regardless of when cash is received, and expenses are recognized in the period incurred, regardless of when cash is paid.
In the context of accounting, practice in which expenses and income are accounted for as if they are earned or incurred, whether or not they have been received or paid. Contrast with the Cash Basis of Accounting.
An accounting method under which income and expenses are charged to the periods for which they are applicable, rather than when payment is made or received. In contrast, cash accounting is the method calling for income and expenses to be based on payment being made or received.
An accounting system that recognizes expenses and revenues when they accrue, not when cash is exchanged. Accrual basis accounting recognizes expenses when incurred and revenues when earned.
The accounting method under which revenues are recognized on the income statement when they are earned (rather than when the cash is received). The balance sheet is also affected at the time of the revenues by either an increase in Cash (if the service or sale was for cash), an increase in Accounts Receivable (if the service was performed on credit), or a decrease in Unearned Revenues (if the service was performed after the customer had paid in advance for the service). Under the accrual basis of accounting, expenses are matched with revenues on the income statement when the expenses expire or title has transferred to the buyer, rather than at the time when expenses are paid. The balance sheet is also affected at the time of the expense by a decrease in Cash (if the expense was paid for when it incurred), an increase in Accounts Payable (if the expense will be paid in the future), or a decrease in Prepaid Expenses (if the expense was paid in advance). To Top