Record the estimated amount of bad debt when you invoice a customer, rather than when it becomes apparent that the customer will not pay you. Record an expense when you incur it, rather than when you pay for it. Record revenue when you invoice the customer, rather than when the customer pays you. Examples of the Accrual PrincipleĮxamples of the proper usage of the accrual principle are: When properly implemented, the accrual principle allows you to aggregate all revenue and expense information for an accounting period, without the distortions and delays caused by the cash flows arising from that accounting period. The accrual principle is a fundamental requirement of all accounting frameworks, such as Generally Accepted Accounting Principles and International Financial Reporting Standards. The accrual principle is the concept that you should record accounting transactions in the period in which they actually occur, rather than the period in which the cash flows related to them occur.
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