Accrual accounting is a method of accounting where income and expenses are recorded when they are earned or incurred, not when cash is received or paid.

Under this method:

Revenue is recorded when goods or services are provided

Expenses are recorded when they arise

It gives a more accurate picture of profit

Example:
If goods are sold in March but payment is received in April, the income is recorded in March.

Most companies use accrual accounting because it shows the true financial position of the business.

In simple terms, accrual accounting means recording transactions when they happen, not when money is exchanged.