accrual basis accounting
Definition
The most commonly used accounting method, which reports income when earned and expenses when incurred, as opposed to cash basis accounting, which reports income when received and expenses when paid. Under the accrual method, companies do have some discretion as to when income and expenses are recognized, but there are rules governing the recognition. In addition, companies are required to make prudent estimates against revenues that are recorded but may not be received, called a bad debt expense.
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Related Terms
accruals
'accrual basis accounting
' appears in the definitions of these terms on BusinessDictionary.com modified cash basis accounting, basis of accounting, cash basis accounting, accounting change, change in accounting method, and 
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