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Home / Glossary / Accrual accounting
Glossary · Month-end and reports

Accrual accounting

Recording income when it is earned and costs when they are incurred, not when cash moves. Most growing companies and every audit need it.

In plain words

Cash accounting records money when it moves. Accrual accounting records income in the month you earn it and costs in the month you incur them, even if the cash moves in a different month.

The difference matters when work and payment are far apart. Accrual shows whether a month was really profitable; cash accounting can make a good month look bad and a bad one look good.

Example

A job done in September, paid in October

Cash basis: income lands inOctober
Accrual basis: income lands inSeptember

On the accrual basis it sits in accounts receivable until the customer pays.

In our model

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