Definition: An accounting method that generally recognizes income when earned and expenses when incurred, rather than when cash changes hands.
Example
A brokerage records an earned receivable before the customer actually pays it.
Keep the distinction clear
Accrual accounting can show income without an immediate cash receipt. Tax recognition rules include additional requirements and exceptions.
Related terms
Income Statement · Asset · Liabilities
Keep studying
References: IRS Publication 538: accounting methods
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