Accrual method

Accrual method

The accrual method is a system of bookkeeping that matches related revenues and expenses and records them when the transaction occurs, rather than when cash changes hands. For example, a sale made on credit would be recorded to income immediately, even though the company has not received cash payment for the sale. Certain related expenses, such as the cost of goods, would also be recorded, even if those were paid for in a prior period. The accrual method is also called accrual accounting or accrual basis accounting. Large businesses commonly use this method.