Define Accrual Concept Accounting - GAAP
Here we define Accrual Concept with example that is a very important concept of Accounting Concepts and it is named as Accrual Concept Accounting and this concept is also laid down under the Generally Accepted Accounting Principles (GAAP). It states that in calculating or computing Accounting Profit, revenue earned must be matched against all the expenses incurred in earning that revenue. For Example all of the cost of sales incurred to generate sales must be matched with that sales revenue of the goods sold eventhough we have unsold goods at the end of the period. You can Lean this example in a better way in this Accruals Vs Cash Basis of Accounting . We account for all those Business Transactions that are either accrued or prepaid, either these types of transactions paid in advance or these are outstanding at the end of Accounting Period of the company businesses. We are not considered the Cash Basis of Accounting where business transactions are r...