accrual

Vocabulary Word

Definition

'Accrual' is a company's earnings or expenses that have occurred but haven't been received or paid yet. It's like a promise for future cash flowing in or out of a business.

Examples in Different Contexts

In corporate finance, 'accrual' is fundamental for understanding a company's financial health. A CFO might declare, 'Despite our strong revenue figures, the high accrual of uncollected debts is a concern.'

Practice Scenarios

Scenario:

Paid vacation leave commencement is pegged to your start date. The accrual rate increases after you have completed your third year with the company.

Response:

That's great. So, I will accrue more vacation days as I continue my tenure with the company.

Economics

Scenario:

When evaluating our company's performance over the fiscal year, consider both cash and accrual basis.

Response:

Agreed. Considering the accrual basis for financial performance can give us insightful information about our economic stability.