What Does Accrual Mean?
Accrual – Explained
An accrual refers to money that is either earned or owed but hasn’t yet been received or paid. In accounting, accruals are used to recognize revenues and expenses at the moment they’re incurred, not when the cash actually changes hands. This means businesses can record transactions when they happen, even if the payment occurs at a later date.
Why Are Accruals Important?
Accruals help provide a clearer picture of a company’s financial position. For example:
- Revenue accruals record income earned but not yet received (like services performed but not yet paid).
- Expense accruals log costs that a business knows are coming but hasn’t yet paid (such as a utility bill that hasn’t arrived).
Accruals aren’t always about cash, either. In HR or payroll, they might include accrued paid time off (PTO), days employees have earned but haven’t used yet.
Real-World Examples of Accruals
- A year-end employee bonus earned in December 2024 but paid in January 2025.
- A sales rep earns a commission in Q1 but won’t receive payment until Q2.
- A company receives goods in March but won’t get the invoice until April, yet it records the expense in March.
Using “accrual” in a sentence:
“Before booking my trip, I need to verify how much PTO I’ve accrued.”
Related Terms
- Employee Records
- New Hire Reporting
- Employer Responsibilities
Helpful Resources from Beyond
- Survey results: What benefits matter most to employees
- A complete state-by-state breakdown of paid family leave laws
- A quick-start guide to payroll accounting for small businesses
Need help tracking accruals in your payroll system? Beyond offers smart tools to automate time-off tracking and expense recognition, helping businesses stay accurate and compliant.