Accrual for Dummies
noun
pronunciation: ə'kruəlWhat does Accrual really mean?
Accrual is a term that is commonly used in finance and accounting, and it refers to the process of recording transactions or events that have occurred, but the payment or receipt of money for those transactions has not yet taken place. It can be a bit tricky to understand, but I'm here to help break it down for you in a way that is easy to grasp.
Imagine you have a lemonade stand. You make a deal with your friend to sell them a glass of lemonade every day for a week. At the end of the week, your friend will pay you for all the glasses of lemonade they consumed.
In this scenario, let's say today is Monday, and you make your first sale. The lemonade is consumed, but you don't receive the payment until the end of the week. Now, according to the concept of accrual, even though you haven't received the money yet, you still need to keep track of the sale you made. You record this transaction in your lemonade stand's books as an accrual.
In simpler terms, accrual means you recognize and record something as if it has happened, even if you haven't actually received or paid any money for it. It helps to keep track of all the transactions and events that have taken place, ensuring that everything is accounted for in the books.
Accruals also work the other way around. Let's say a customer buys a glass of lemonade on Friday, but they decide to pay you the following Monday. Even though the purchase happened on Friday, you will record it as an accrual on Friday since that is when the event took place, even if the money isn't received until Monday.
So, to summarize, accrual means recognizing and recording a transaction or event in the books, even if the payment or receipt of money hasn't happened yet. It helps maintain accurate financial records and ensures that all transactions are properly accounted for.
Imagine you have a lemonade stand. You make a deal with your friend to sell them a glass of lemonade every day for a week. At the end of the week, your friend will pay you for all the glasses of lemonade they consumed.
In this scenario, let's say today is Monday, and you make your first sale. The lemonade is consumed, but you don't receive the payment until the end of the week. Now, according to the concept of accrual, even though you haven't received the money yet, you still need to keep track of the sale you made. You record this transaction in your lemonade stand's books as an accrual.
In simpler terms, accrual means you recognize and record something as if it has happened, even if you haven't actually received or paid any money for it. It helps to keep track of all the transactions and events that have taken place, ensuring that everything is accounted for in the books.
Accruals also work the other way around. Let's say a customer buys a glass of lemonade on Friday, but they decide to pay you the following Monday. Even though the purchase happened on Friday, you will record it as an accrual on Friday since that is when the event took place, even if the money isn't received until Monday.
So, to summarize, accrual means recognizing and recording a transaction or event in the books, even if the payment or receipt of money hasn't happened yet. It helps maintain accurate financial records and ensures that all transactions are properly accounted for.
Revised and Fact checked by Patricia Williams on 2023-11-06 02:47:03
Accrual In a sentece
Learn how to use Accrual inside a sentece
- Accrual refers to the accumulation or buildup of something over time. For example, the interest that is added to a savings account each month is an accrual.
- In a job, employees often earn vacation time that accrues or adds up each month. This means that they gradually accumulate more vacation hours as time goes on.
- If you lend someone money and they agree to pay you back with interest, the interest that they owe you can accrue or increase over time until they fully repay the debt.
- In accounting, companies may have expenses that are incurred but not immediately paid for. These unpaid expenses are recorded as accruals until they are settled in the future.
- Some jobs offer employees bonuses based on their performance. If the bonus is paid out over time, it can be considered an accrual because it accumulates gradually.
Accrual Synonyms
Words that can be interchanged for the original word in the same context.
Accrual Hypernyms
Words that are more generic than the original word.
Accrual Hyponyms
Words that are more specific than the original word.