Accrual - How do accruals work?

Q: How do accruals work?

Using accruals, companies record expenses when incurred with or without any cash payments for the expenses. To record an expense in the period in which it is incurred, companies debit the expense account and credit the accounts payable, an account used to track the amount of cash owed by the company to suppliers.

Answer

Whether or whether the company receives paid in cash, accruals allow it to report expenses as they occur. A company's accounts payable, which keeps track of the money due to suppliers, and the expense account are debited to record expenses in the period in which they are incurred.

Accrual - How do accruals work?

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