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Accrual accounting

What is accrual accounting?

Accrual accounting is a method of accounting where revenues and expenses are recorded when they are earned or incurred, regardless of when the money is actually received or paid.

This accounting principle aligns with the matching concept in accounting, which states that all related revenues and expenses should be matched and reported for the same period. For example, if you performed a service in December but didn't receive payment until January, under accrual accounting, you would record the revenue in December. Accrual accounting gives a more accurate picture of a company's financial health than cash accounting, although it is more complex.

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