Accrual Accounting

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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, revenues 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, expenses and 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.