Accrual-based accounting is an accounting method in which income and expenses are entered into the books of a business at the time they are incurred, regardless of whether cash has changed hands of not. For example, a business which makes a credit sale will enter the transaction as a ‘sale’ at that point, rather than waiting until payment is actually received. Similarly, when the business receives goods or services on credit, these are immediately recorded as an expense, even though they may only be paid for at a later date.

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