Accrual Concept

The concept of accrual, which is the basis of accrual accounting, “the accounting method according to which revenues are recognized in the income statement when they are earned (and not when cash is received). The balance sheet is also affected at the time of revenues, either by an increase in cash (if the service or sale is for cash), or an increase in accounts receivable. (if the service is provided on credit), or a decrease in unearned revenue (if the service is performed after the customer has prepaid for the service.) Under the accrual principle of accounting, expenses are matched to revenues on the income statement when the expenses expire or ownership passes to the buyer , not at the time the expense is paid. The balance sheet is also affected at the time of the expense by a decrease in cash (if the expense is paid at the time the expense is incurred), an increase in accounts payable (if the expense will be paid in the future), or a decrease in expenses Prepaid (if expenses are paid in advance).

- Used in planning, organizing, and controlling business operations.
- Used when setting KPIs, policies, procedures, and improving processes.

- Example: Management applies **Accrual Concept** when designing policies and monitoring performance against targets.

- Why it matters: Improves execution, accountability, and decision speed while reducing operational waste.