In Acounts how does the accrual concept work?

Answer 1

If I understand your question, Accrual basis accouting takes revenues and expenses as the occur, not when they are paid. Ex.; if you issue an invoice today for $200.00 to a customer, the revenue is booked right away, even if the customer pays it 60 days later. If you get a bill for $200.00 from a vendor today, the expense is booked right away even if you pay the bill next month. In Cash Basis, revenues and expenses are booked when they are paid. Ex.; if you issue an invoice today for $200.00 and the customer pays it in August, the revenue is booked in August - the day you receive the actual payment. If you get an bill today from a vendor, the expense is booked when you actually pay it.

Answer 2

Basically you anticipate on how much expense or revenue you will have for that account and you accrue for it. The reason why businesses do it is because the accrual method is the only one allowed by GAAP.
The person above describes the matching principle, not accrual. Accrual of expenses is when you know you will have that much expense for the year. So you accrue the amounts on monthly basis to record the expense. Then when you actually pay the bill, or collect the revenue you expense the amount you actually paid and deduct it from the accrual you have recorded so far. For example- if you are in litigation and your lawyer thinks that most likely then not you will loose and he can estimate the loss to about $100,000. You will accrue for that amount now, to ut money on the side for this future expense and latter on when you actually loose and have to pay you will reduce the accrual by that much and record it as an expense.

Answer 3

Acruall account simply means that the accounts aer being updated as regularly as they happen. You can either account for everything at one point in time or you can accrue them as they happen.

An example of accrual accounting would be balancing your checkbook. As each transaction happens, you adjust the balance of the account. This is done on a continuing, ongoing (accruing) process.

Non-Accrual accounting of your check book would be to adjust the balance for each transaction on a monthly basis.

In accrual accounting you know the correct balance of each account at any given point in time.