Accounting Dictionary

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Accrual Accounting

Definition: Accrual accounting is the recording of revenue when earned and expenses when incurred, irrespective of the dates on which any associated cash flows occur. Accrual basis accounting conforms to generally accepted accounting principles (GAAP) and international financial reporting standards (IFRS). Accrual accounting is required by these two major accounting frameworks, because it results in the most accurate representation of the financial results and financial position of a business. 

Small businesses may use the less-complex cash basis of accounting. The cash basis is not considered as accurate as accrual accounting, since the recognition of transactions under the cash basis may be accelerated or delayed in accordance with when cash is received or paid.