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In accounting, an accrual is an accounting concept that refers to the recording of revenue or expenses that have been incurred or earned, but have not yet been received or paid. Accruals are necessary to ensure that financial statements accurately reflect the company’s financial position and performance.

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There Are Two Types Of Accruals:

Accrued expenses are expenses that have been experienced but not yet paid. For example, if a company pays its employees on a biweekly basis, but the end of the accounting period falls in between pay periods, the company would record an accrued expense for the wages that have been earned but not yet paid.

Accrued revenues are revenues that have been made but not yet received. For ex, if a company provides services to a customer on credit, the company would record an accrued revenue for the amount of the service that has been provided but not yet paid for.

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