What is accrual accounting?

Accrual accounting is considered the standard accounting practice for most companies, with the exception of very small operations.

Accrual accounting matches revenue earned with expenses incurred during a fiscal period. An example would be a company that shipped products or performed billable services in March (during its first quarter), but didn't bill or collect money from the customer until April. With the accrual method, the sales value is recorded or accrued in the first quarter—the fiscal period when the goods were delivered or services performed.

Read Revenue Recognition for more information.

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