Accrual Accounting
Accrual accounting is a method of accounting that records revenues and expenses when they are earned or incurred, regardless of when cash is exchanged. This approach recognizes economic events regardless of when cash transactions occur, providing a more accurate depiction of a company's financial position and performance over a specific period. Accrual accounting follows the matching principle, where expenses are recognized in the same period as the revenues they help generate, resulting in a more comprehensive and transparent representation of a business's financial activities. This method is widely used by businesses to measure their profitability and financial health more accurately compared to cash-basis accounting.
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