Accrual principle
Accrual accounting means that expenses and income are assigned to the financial year that economically caused them, regardless of when payment falls.
Definition
The tool for this is accruals and deferrals: an insurance premium paid in December for the following year is an expense of the following year; a service delivered in December but invoiced only in January is income of the current year.
Without accruals the profit wanders between years and comparison over time becomes meaningless. That is precisely the difference between accounts and a record of payments.
Where to read it
What the software must be able to do
Check whether accrual entries with automatic reversal in the following period are possible. Whoever sets them by hand and forgets to reverse them the next year has merely moved the error.
Checked Aug 2026
More terms under Bookkeeping and retention: Accrued liabilities Annual accounts Association accounting Balance sheet Balance sheet total Book value Break-even point Business assets Business expenses Cash book Cash flow statement Cash receipts Contribution margin Cost centre Current assets Debit and credit Depreciation Double-entry bookkeeping Duty to keep accounts EBIT EBITDA Equity Equity ratio Financial year Fixed assets Fixed costs Foreign currency General ledger Gross profit Hidden reserves Income statement Inventory count Journal Journal entry Liabilities Liquidity Loss carry-forward Membership dues Net profit Opening balance sheet Overheads Pass-through item Prepaid expenses Provision Record-keeping ordinance Reserves Retained profit Simple accounts Swiss SME chart of accounts Tamper resistance Turnover Value adjustment Variable costs Volunteer-run structure Voucher Year-end closing modules