In Accrual Accounting Expenses are recorded when they are incurred and Income when it is earned where as in Cash Accounting expenses are recorded when they are paid and income when it is received. This method provides more accurate information about the current condition of any entity.Why is accrual accounting preferred?
Accrual accounting is generally preferred because it gives a fairer picture of the business' real obligations, including those transactions that have been committed to but not yet completed.How do accruals work?
How Accrual Accounting Works. Unlike cash accounting, where income is recorded when cash payments (these can also be credit-card receipts, checks or other forms of payment) are received from customers and expenses are recorded when cash is paid to vendors, accrual accounting focuses on when income is earned and expenses are incurred.