accrual accounting
The accrual accounting method provides a summary of the funds received and expended during a given time period.
Before money is received or spent, revenue and expenses are recorded using accrual accounting. When the cash necessary for those activities is actually received or spent, cash basis accounting reports revenue and expenses accordingly.
Revenues and costs are matched to the time periods in which they are incurred using accrual accounting. This enables businesses to keep a closer eye on their cash flow and to spot and address any possible problems with profitability.
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