cheap accountants - accruals

Accruals accounting is another accounting term that is often used by accountants and this blog post has been written to describe what this term means.

Accruals accounting is basically a system of accounting based upon the accruals principles. Those principles being the recognition or recording of revenue when earned rather than received in cash. As well as, the recognition or recording of expenses when incurred rather than paid in cash. This results in the total of revenues and expenses being shown within the annual company accounts regardless of whether or not cash was actually received or paid out during the period.

Accruals can be defined as accounting adjustments for:

1. Revenues that have been earned but are not yet recorded in the accounts.

2. Expenses that have been incurred but are not yet recorded in the accounts.

Accruals are added to existing balances to ensure that the financial statements, or company accounts, reflect these amounts.

In summary, this accounting method measures the performance and position of a company by recognising economic events regardless of when cash transactions occur.