The accrual concept of accounting is a fundamental principle in financial accounting that requires revenues and expenses to be recorded in the period in which they are earned or incurred, regardless of when cash is received or paid. This means that companies must record transactions as they happen, even if cash does not change hands at the same time.

For example, if a company sells goods on credit in October, the revenue from the sale should be recorded in October, even though the company may not receive cash payment until November. Similarly, if a company incurs expenses in October, such as rent or salaries, those expenses should be recorded in October, even though the company may not pay the bills until November.

The accrual concept is based on the idea that matching revenues and expenses to the period in which they are earned or incurred provides a more accurate and complete picture of a company's financial performance. This is because it allows users of financial statements to see how well a company is performing over time, regardless of when cash flows occur.

There are two main types of accruals:

* **Accrued revenues:** These are revenues that have been earned but not yet received in cash. For example, if a company sells goods on credit, the revenue from the sale is accrued in the period in which the sale occurs, even though the company may not receive cash payment until later.

* **Accrued expenses:** These are expenses that have been incurred but not yet paid in cash. For example, if a company uses up inventory in October, the cost of the inventory is accrued in October, even though the company may not pay the supplier until November.

Accruals are recorded in the financial statements using adjusting entries. Adjusting entries are journal entries that are made at the end of an accounting period to correct for transactions that have not been recorded in the normal course of business. For example, an adjusting entry would be made to record accrued revenues or expenses at the end of the period.

The accrual concept is a complex concept, and there are many different types of accruals.
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