Topic summary
Accrual accounting
Extracted from the Wikipedia article Accrual.
Accruals in accounting
Accrual accounting recognizes revenues and expenses when they are earned or incurred, not necessarily when cash is received or paid. For instance, if a company delivers a product in one financial year but will receive payment in the next, the revenue is recognized in the current financial year. Similarly, the company who receives the product also recognizes the expenses incurred in the current financial year, even if the actual payment is made later.