accrual basis accounting

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A system of accounting based on the accrual principal, under which revenue is recognized (recorded) when earned, and expenses are recognized when incurred.

Totals of revenues and expenses are shown in the financial statements (prepared at the end of an accounting period), whether or not cash was received or paid out in that period. Accruals basis accounting conforms to the provisions of GAAP in preparing financial statements for external users, and is employed by most companies except the very small ones (which use cash basis accounting). Also called accrual accounting. See also modified accrual basis accounting.

Use 'accrual basis accounting' in a Sentence

The man started his small business, and was getting up to speed from his accountant on the basics of accrual basis accounting, a concept which seemed a little difficult to him.
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Accrual basis accounting typically provides a more accurate measure of a company's profitability as it takes into account all revenue and expenses irrespective of cash collections and expenditures.
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You need to know how the accrual basis accounting system works and keep good records of all it is that you do.
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