Accrual Basis

Accrual accounting recognizes income and expenses when they are earned or incurred, not when cash is received or paid.

Under the accrual basis, transactions are recorded in the period to which they relate, improving matching between revenues and expenses and providing a more accurate financial picture.

- Used in day-to-day bookkeeping and journal entries to record transactions correctly.
- Used when preparing trial balances and reconciling accounts.

- Example: Accountants use **Accrual Basis** when recording transactions and preparing the trial balance.

- Why it matters: Ensures accurate records, supports reliable reporting, and reduces posting and reconciliation errors.