Question

What are the major rules for recording transactions using the accrual basis of accounting?

Answer 1

Under accrual basis of accounting transactions are recorded in the period (ie. month, year) in which they took place irrespective of cash received or cash paid.

For example sales of $10,000 are made in the month of January but the amount is received in February. Under accrual basis of accounting sales will be recorded in the month of January.

For example salaries expense of $5,000 for the month of April is paid in the month of December. Under accrual basis of accounting salaries expense will be recorded in the month of April.