An accounting method where income is reported as soon as it is earned (as opposed to when it is actually received) and expenses are reported when they are incurred (as opposed to when they are paid).
See cash method of accounting.
One of the two most common methods of accounting, the other being the cash method. Under the accrual method of accounting, income is reported in the tax year earned, whether or not received, and deductions are claimed in the tax year incurred, whether or not paid.
Most businesses use the accrual method of accounting (because it is usually required by law). When you issue an invoice on credit (ie. regardless of whether it is paid or not), it is treated as a taxable supply on the date it was issued for income tax purposes (or corporation tax for limited companies). The same applies to bills received from suppliers. (This does not mean you pay income tax immediately, just that it must be included in that year's profit and loss account).
Accounts for income and expenses in the 12-month period earned or incurred, which is not necessarily when it is received or paid.
A selected method of accounting often used by larger corporations. Income and expenses are booked when "accrued", whether or not they have actually been paid or received. This method designates expenses as incurred and income as earned for the accounting period when due or receivable.
With the accrual method, you record income when the sale occurs, not necessarily when you receive payment. You record an expense when you receive goods or services, even though you may not pay for them until later.
This accounting method allows for income to be reported in the year it was earned, whether or not received, and deductions to be claimed in the year incurred, whether or not paid.
A method of reporting income when earned and expenses when incurred, as opposed to reporting income when received and expenses when paid. Obligations payable to or by a taxpayer are treated as if they are discharged when they are incurred.
With this method, income is reported in the fiscal period it is earned, regardless of when it is received. The expenses are also deducted in the fiscal period they are incurred, whether they are paid or not. This method is generally used by businesses or professionals.
An accounting method is which revenue is recognized as income when it is earned, even though not received and expenses are recognized when incurred even though not yet paid. (See Cash Method)
See accrual basis of accounting. To Top