16 December 2008
In simple terms, accrual concept will arise when expense incurred but not paid by cash during the financial year and may be paid in succeeding financial years or income earned but not received by cash during the financial year.
16 December 2008
Arrual means : a income which is raised but amount is receivable. Example : work was done for that work amount is not received. For any problem contact me. I am online account teacher.
17 December 2008
Accrual describes the concept that recognizes revenues and expenses when they are earned or incurred (accrued or accumulated) regardless of the actual cash payments or receipts.
Accrued revenue: Revenue is recognized before cash is received.
Accrued expense: Expense is recognized before cash is paid out.
E.g. on December 30, a company delivers a product to a customer who will pay out for that product 30 days later. Assuming the fiscal year ends on December 31, the company still records that as revenue its current income statement even though it will get paid in cash during the following fiscal year.
Similarly, a salesperson, who sold the product, earned the commission at the moment of sale (or delivery). The company will record the expense (commissions) in its current income statement, even though he will actually get paid at the end of the following week, in the next accounting period.
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