The accrual method of accounting is another name for the accrual basis of accounting, the system under which revenue is recorded when it is earned and expenses are recorded when they are incurred, whatever the timing of the related cash. The main entry covers how revenue and expenses are matched, the balance sheet effects and why accounting standards require it.
Where the name is used
"Method" is the word most often used in tax settings. In the United States, the Internal Revenue Service describes the choice a business makes as its accounting method, so tax forms, guidance and advisers tend to speak of the accrual method and the cash method. Financial reporting texts more often say accrual basis, and the two phrases describe the same practice.
Under either name, a sale on credit is recognised when the goods are delivered, creating accounts receivable, and wages earned in December are charged to December even if they are paid in January. This follows the matching principle, which links costs to the revenue they help produce. The alternative is the cash basis, which records items only when money changes hands and is simpler but can give a misleading picture of profit in any single period. Larger companies reporting under generally accepted accounting principles (GAAP) or IFRS must use the accrual method for their published financial statements.