What is the accrual principle?

The accrual principle is one of the main rules established regarding the accounting of a . The accrual principle concept is collectively accepted and included within the General accounting plan. In accordance with this accounting principle, all movements and banking or economic transactions must be compulsorily recorded at the time they take place, whether they are already collected or not.

One of the most recurrent applications of the accrual principle is subsidies, although in this case the events should not be recorded until the moment the subsidy becomes final and payment is received. Thus, one of the differences between the accrual principle and the cash principle is that the information provided by the former is more reliable and truthful.

Characteristics of the accrual principle

These are the characteristics of the accrual principle that perfectly define how is the allocation of income and expenses:

  • Transactions are noted in the Accounting seat (regardless of whether they have already been collected or paid or not
  • For each accounting year, companies will have to show in the Profit and loss account all expenses and income corresponding to said accounting period
  • The accrual principle directly affects the equity of the company, since it can involve a modification both qualitatively and quantitatively.

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