What Is Accrual Basis Of Accounting?


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Anonymous Profile
Anonymous answered
Accrual basis accounting is taking all revenue earned in a period and matching it with all expenses incurred during that exact period whether they have been paid for in cash or not. Expenses that are paid and relates to another period or over a greater period than the accounting period in question then that equal amount is apportioned out and represents your prepaid amounts. This will sit on your balance sheet on the asset side. Expenses incurred but that have not been paid for are accrued and meaning that the expense with sit on the income statement and the corresponding credit will with sit on your balance sheet as a liability so that when your receive the bill all you need to do is debit your liability and credit cash. No entry is too the income statement as it has already being recorded in the period it relates to.

In summary an accrual basis accounting is taking all revenue earned and all expenses/obligations incurred for the same period whether paid or not or cash received or not.
Cihan Barut Profile
Cihan Barut answered
Under this principle, revenue and costs are recognised as they are incurred rather than when the cash is paid or received.

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