Accrual Basis

An accounting method in which revenues and expenses are recognized and recorded when they are earned or incurred, regardless of when cash is exchanged.

A method of accounting where income and expenses are recorded when they are earned or incurred, rather than when cash is received or paid. This approach provides a more accurate and comprehensive financial picture, allowing businesses to measure their profitability and financial performance over a specific period. Implementing accrual basis accounting is crucial for small business owners seeking to understand their revenue streams and make informed financial decisions that align with long-term growth.