The-definition.com

Definition

Accrual-basis accounting

Accrual-basis accounting refers to an accounting basis in which companies record transactions that change a company’s financial statements in the periods in which the events occur.

For example, using the accrual basis to determine net income means companies recognize revenues when earned (rather than when they receive cash). It also means recognizing expenses when incurred (rather than when paid).

Share it:  Cite

More from this Section

  • Contribution margin ratio
    Some managers prefer to use a contribution margin ratio in CVP analysis. The contribution ...
  • Retained earnings
    Retained earnings are net income that a corporation retains for future use. Net income ...
  • Accounting system
    Accounting system is an organized approach to gathering, recording, analyzing, summarizing, ...
  • Raw materials inventory
    Raw materials inventory is a general ledger account. It is also referred to as a control ...
  • Income summary
    Income summary refers to a temporary account used in closing revenue and expense accounts. ...