Accounting principles and Policies

4. Accrual Concept:
According to this principle –

All the revenues should be recognized when they are earned, not when they are received in cash, and
Similarly, the expense should be recognized when they are incurred, not when they are paid this concept is based on the matching concept of accounting.

For example, suppose a building is taken on rent for the purpose of business on 1st February. The financial year ends on 31st December. In such a situation, as per accrual, the total rent for eleven months should be shown in the profit and loss account, irrespective of the actual amount paid for rent during the year.

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