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Line 1: − Calculating [[revenues]] or expenditures on the basis of when they are earned or encumbered,rather than when payment is received or made, respectively. Accrual revenues are considered earned when a claim for reimbursement is submitted. Accrual expenses are considered encumbered when a Purchase Order or contract is submitted.+ + +
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'''Accrual accounting''' is a method of accounting which is the most commonly used in business. Companies that are publicly-traded or subject to government regulation are required to use accrual accounting.
Under accrual accounting, [[revenue]]s are recorded on the accounting records when they are earned (usually when the sale is made), as opposed to when payment is received under [[cash accounting]]. Similarly, [[expense]]s and [[liability|liabilities]] are recorded when the entity is legally responsible for payment (usually when the good is received or the service performed), as opposed to when payment is made.
[[Category:Budget Terms]]
[[Category:Budget Terms]]
[[Category:Accounting]]
[[Category:Accounting]]