A method of accounting that tracks revenues and expenses as they are incurred....
The most commonly used accounting method, which reports income when earned and expenses when incurred, as opposed to cash basis accounting, which reports income when received and expenses when paid.
This is the accounting system in which reports are drawn from accounts payable, accounts receivable, cash sales, and cash payments. Most accountants recommend accrual basis accounting if you bill your customers or incur debt. (See Cash Basis Accounting)
With accrual basis accounting, you "account for" expenses and sales at the time the transaction occurs. This is the most accurate way of accounting for your business activities. If you sell something to Mrs. Fernwicky today, you would record the sale as of today, even if she plans on paying you in two months. If you buy some paint today, you account for it today, even if you will pay for it next month when the supply house statement comes. Cash basis accounting records the sale when the cash is received and the expense when the check goes out. Not as accurate a picture of what is happening at your company.
Accrual-basis accounting records financial events based on events that change your net worth (the amount owed to you less the amount you owe others). Standard practice is to record expenses with the incomes they are associated with. For example, your landlord would record an income event on the day your rent comes due (you owe it to him). He records an expense event when the fee owed to the rental agent comes due for your apartment that month (he owes it to the agent). The details of the actual cash flows and their timing are tracked by bookkeeping.
Transactions are recorded when they have been reduced to a legal or contractual right or obligation to receive or pay out cash or other resources.
Accounting method that recognizes and records income when it is earned and expenses when they are incurred, regardless of whether cash has been received or paid.
An accounting method that records sales, expenses or other events at the time they occur, rather than when cash changes hands.
A method of accounting that reports income when it is earned (although not necessarily yet received) and expenses when incurred (even if bills are paid later). This is in contrast to cash-basis accounting, which reports income when it is actually received and expenses when they are actually paid.
The practice of bookkeeping when income is recorded when earned and expenses are recorded when they are incurred. (Opposite of Cash Basis Accounting, the way you run your personal checkbook; personal finances are almost always cash basis. Believe it or not, Accrual Basis accounting turns out to be a truer way of showing the profitability of your business.)
A method of accounting in which transactions are recorded when revenues and expenses are incurred, regardless of whether or not cash has been paid or received.