Accrual Accounting Method Law and Legal Definition

Accrual accounting method means an accounting method that records the performance and position of a company by recognizing economic events rather than when the income or expense is received or disbursed. Here, economic events are recognized by balancing revenues to expenses at the time when transaction occurs rather than when payment is made. It gives a more accurate picture of a company's current financial condition by combining the current cash inflows and outflows with future expected cash inflows and outflows. It is just the opposite of cash accounting, which recognizes transactions only when there is an exchange of cash. Most companies consider accrual accounting method as the standard accounting. It is the increasing complexity of business transactions and the desire for more accurate financial information that necessitated the need for such a method. It is also called as accrual accounting, or accrual method of accounting.