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Under Accruals basis of accounting, income must be recorded in the accounting period in which it is earned. Therefore, accrued income must be recognized in the accounting period in which it arises rather than in the subsequent period in which it will be received. Conversely, prepaid income must be not be shown as income in the accounting period in which it is received but instead it must be presented as such in the subsequent accounting periods in which the services or obligations in respect of the prepaid income have been performed.
Expenses, on the other hand, must be recorded in the accounting period in which they are incurred. Therefore, accrued expense must be recognized in the accounting period in which it occurs rather than in the following period in which it will be paid. Conversely, prepaid expense must be not be shown as expense in the accounting period in which it is paid but instead it must be presented as such in the subsequent accounting periods in which the services in respect of the prepaid expense have been performed.
Accruals basis of accounting ensures that expenses are "matched" with the revenue earned in an accounting period. Accruals concept is therefore very similar to the matching principle.
Hope answer the question.
IN SIMPLY ACCRUAL JUST LIKE A SUSPENSE ACCOUNT. SOME TIMES WE WILL NOT ABLE TO GET ALL THE COST WITH IN CLOSING PERIODS. SO WE CAN TAKE THE COST ASPER PREVIOUS ONE OR BASED ON APPROVED DOCUMENTS,THAT WILL HELP US TO GET ACCURATE INCOME STATEMENTS , AND FINALLY AT THE END OF THE PERIOD WE WILL RECONCILE THE ACCRUAL LEDGER AND IF WE GETTING CREDIT BALANCE MORE THAT WILL GO TO THE CREDIT SIDE OF INCOME STATEMENT, IF ITS DEBIT SHOWING MORE SHOULD GO TO DEBIT SIDE OF THE INCOME STATEMENT. I HOPE YOU UNDERSTAND. IF ANY MISTAKE IN THIS EXPLENATION PARDON ME .
THANKS AND BEST WISHES
A system of Accounting in Which cash and Credit Transaction are recorded.
