Accrual Accounting

An accounting method where revenue and expenses are recorded when they are earned or incurred, regardless of when cash transactions occur. This approach provides a more accurate representation of a company’s financial position by matching revenues with expenses in the period in which they occur, rather than when cash is received or paid. Accrual accounting adheres to the matching principle, which ensures that financial statements reflect the economic reality of transactions, even if cash hasn’t exchanged hands yet.