← Glossary GLOSSARY

Accrual accounting

Recognize revenue when earned and expense when incurred — regardless of when cash moves.

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The longer version

Under accrual accounting, you book a sale when the customer takes delivery, not when their payment lands. You book rent expense in the month it covers, even if you paid annually up front. The result is a P&L that tracks economic activity, not just cash movement.

Why it matters in your books

Cash-basis books look fine until growth, deferred revenue, or inventory enters the picture — at which point they stop reflecting reality. Lenders, investors, and most state tax authorities expect accrual financials.