Short notes on accrual concept
Understand the Problem
The question is asking for a brief explanation or summary of the accrual concept, which is an accounting principle that recognizes revenue and expenses when they are incurred, regardless of when cash transactions occur.
Answer
Accrual concept records revenues/expenses when earned/incurred, not when cash is exchanged.
The accrual concept is an accounting principle that requires recording revenues and expenses in the period they are earned or incurred, regardless of when cash transactions occur.
Answer for screen readers
The accrual concept is an accounting principle that requires recording revenues and expenses in the period they are earned or incurred, regardless of when cash transactions occur.
More Information
The accrual basis of accounting provides a more accurate picture of a company’s financial situation by showing revenues and expenses as they occur. This principle is a key component of generally accepted accounting principles (GAAP).
Tips
A common mistake is confusing cash accounting with accrual accounting; always distinguish between when cash changes hands versus when a transaction is recorded.
Sources
- The web page with info on - Example Source - cleartax.in
- What Is Accrual Accounting, and How Does It Work? - Investopedia - investopedia.com
- Accrual Principle - Definition, How it Work, Importance - corporatefinanceinstitute.com
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