Prativa - Accrual accounting measures a company's finances by business events irrespective of when cash was debited or credited in the account. All of us are typically used to cash accounting were we account for revenue, expenses etc when cash is either deposited or removed from our accounts.
Aug 22 2012 12:17 PM
However company's always use accrual accounting and not cash accounting. Simple example is this - if you buy a TV with a credit card for Rs.50,000, in cash accounting this Rs.50,000 will be considered as revenue only when the company gets the cash from the credit card company (in a few days). In accrual accounting, the Rs.50,000 is immediately considered as revenue, since the cash will come anyway.