Accrual Basis Accounting

Accrual basis accounting is a method of recording financial transactions when they occur, rather than when cash is exchanged. This means income is recognized when earned, and expenses are recorded when incurred, regardless of when payment is actually received or made. For example, if you complete a service in December but get paid in January, the income is recorded in December. This approach provides a more accurate picture of a company's financial health, as it reflects all resources and obligations during a specific period, rather than just those involving immediate cash transactions.