Accrual Basis (Noun)
Meaning
A method of accounting in which each item is entered as it is earned or incurred regardless of when actual payments are received or made.
Classification
Nouns denoting possession and transfer of possession.
Examples
- The company adopted the accrual basis of accounting to provide a more accurate picture of its financial performance.
- Accrual basis accounting is commonly used by businesses to match revenues and expenses in the same period.
- Under the accrual basis method, revenue is recorded when it is earned, regardless of when payment is received.
- The accountant prepared the financial statements on an accrual basis, reflecting all expenses and revenues for the year.
- Switching from a cash basis to an accrual basis allowed the company to better align its financial statements with its business activities.