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 nonprofit finance, 'accrual' could pertain to funds committed by donors but not yet received. A charity treasurer might note, 'The accrual of pledged funds will significantly boost our project's budget next quarter.'

Practice Scenarios

Accounting

Scenario:

The financial statements have been prepared on an accrual basis, capturing revenues and expenses for the right period.

Response:

So on an accrual basis, we already count revenue when a sales agreement is signed, not when the payment is received.

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.