Accrual Basis Accounting

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

 

Total of revenues and expenses are shown in the financial statements whether or not cash was received or paid out in that period. Accrual Basis Accounting conforms to the provisions of GAAP in preparing financial statements for external users, and is employed by most of the companies except the very small ones. This basis is commonly known as Accrual Accounting.

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