Accruals basis
The accruals basis records the effects of transactions when they occur, rather than only when cash moves. Income and expenses are recognised in the periods to which the underlying rights, obligations and consumption relate, using the applicable recognition rules. This produces receivables, payables, accruals, prepayments and depreciation. The statement of cash flows separately explains cash movements.
Worked example
A service delivered on credit in December produces December revenue and a receivable, even if the customer pays in February.
Common mistake
Accrual accounting does not permit arbitrary matching: a balance must meet the requirements for recognition as an asset or liability.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | F1 | Direct | July 2027–August 2028 |
| ACCA | F2 | Supporting | July 2027–August 2028 |
| ACCA | FA | Direct | September 2026–June 2027 |
| ACCA | K1 | Direct | July 2027–August 2028 |
| CIMA | BA3 | Direct | Official assessment-window verification pending |
| FIA | FFA | Direct | September 2026–June 2027 |
Related terms
Also called: Accrual accounting, Accrual basis