Accrual Basis

Accrual basis accounting recognizes revenue when it is earned and expenses when they are incurred, regardless of when cash moves. It provides a more accurate picture of financial performance on the income statement.

Accrual accounting contrasts with cash basis accounting, which records transactions only when cash changes hands. Most large businesses use accrual accounting for financial reporting.

Related Terms

Accrued Interest

Accrued interest is interest that has been earned or incurred but not yet paid. It accumulates betwe...

Deferred Revenue

Deferred revenue is money received for goods or services that have not yet been delivered. It is rec...

Prepaid Expense

A prepaid expense is a payment made in advance for goods or services to be received in the future. I...

Income Statement

An income statement is a financial statement that summarizes revenue, expenses, and profit over a sp...

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