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Accounting
Accruals Concept
Recording revenues and expenses when they are earned or incurred, not when cash actually changes hands.
The accruals concept (also called the matching principle) is fundamental to proper accounting. It makes financial statements more useful by showing the real economic activity of the period rather than just cash movements.
It's writing down the pizza you ate on your IOU list the moment you eat it, not when you finally pay the delivery guy next week.
Real world: A consulting firm finishes a £20,000 project in December but gets paid in January. Under the accruals concept it records the revenue in December so the profit for the year is shown correctly.
💡 Accruals make accounting honest about when money was really earned or spent.