What is Accrual accounting

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Accrual accounting is a method of accounting where revenues and expenses are recognized when they are earned or incurred, regardless of when the payment is received or made.

Revenue and expenses are recorded when they are earned or incurred, not when the payment is received or made
This method provides a more accurate picture of a company's financial health
It is required by law for certain businesses, such as publicly traded companies
Example: A company provides services to a client in December but doesn't receive payment until January. Under accrual accounting, the revenue is recorded in December when the service was provided, not in January when the payment was received.

What is Accrual accounting

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