What is accrual method of accounting?

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What exactly is the accruals method of accounting and how does it differ from the cash accounting method? Can you please give me an example to understand the difference between accruals and cash basis?

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score 0 · Answer 1 · 2012-12-02T21:33:40+00:00

Accrual method basically refers to the matching of the expenses and the revenue to the period that it was earned or incurred. The time that it was paid or received is irrelevant. If you pay rent every 5 months, you will have an accrual or a prepayment for example. Under Cash accounting, revenue and expenses are recognized when they are paid regardless of the period which they relate to.