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What is accrual accounting?



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Accrual Accounting refers to the recording of financial transactions once an economic event has happened and is not based on the movement of cash.

For example, in Accrual Accounting if you have office rent of $1000 per month, you would record the expense of $1000 each month, regardless if you have actually paid the rent or received an invoice from the landlord.

Most individuals (you and me) live our daily lives in the cash basis of accounting. We we get our paychecks we have revenue, when we pay our car note we have expense.