Accrual Accounting Convention

Accrual Accounting Convention

An accounting system that tries to match the recognition of revenues earned with the expenses incurred in generating those revenues. It ignores the timing of the cash flows associated with revenues and expenses.

Accrual Accounting

A system of accounting that recognizes revenue and matches it with the expenses that generated that revenue. Unlike other systems of accounting, which recognize revenue and expenses in the order in which they are received, the accrual accounting convention ignores the function of time and only considers what expenses generate what revenues, even if payments have not actually been made. Companies with inventories are required to use the accrual method for tax purposes.
References in periodicals archive ?
Unfortunately, analysts and investors are prisoners of the established accrual accounting conventions that focus exclusively on reported earnings and are not cash specific.