Accrual systems

Accrual systems are accounting methods that record financial transactions when they occur, regardless of when cash is exchanged. This means revenues are recognized when earned, and expenses are recognized when incurred, not necessarily when money changes hands. For example, if a business provides a service in December but gets paid in January, the revenue is recorded in December. This approach provides a more accurate picture of a company's financial health during a specific period, helping stakeholders understand economic activity more precisely than cash-based accounting.