Accrual Basis of Accounting

A method of financial accounting or financial reporting whereby events (generation of revenue, incurring expenses, etc.) that change the financial position of a business are recorded in the time period in which the events actually occur. Revenue is recorded when earned and expenses are recorded when incurred; as contrasted to cash basis of accounting when revenue is recorded only when cash is received and expenses are recorded only when cash is paid. (I-4)

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