ACCRUAL CONCEPT OF ACCOUNTING

ALL ABOUT ACCOUNTING :- 25th BLOG

                ☆☆☆ACCOUNTING☆☆☆

Hi freinds., 🙏

Today's discuss 8th concept of accounting....

                                             So let's discuss ..... 

  ★ ACCRUAL CONCEPT :

The meaning of accrual is something that becomes due especially an amount of money that is yet to be paid or received at the end of the accounting period. It means that revenues are recognised when they become receivable. Though cash is received or not received and the expenses are recognised when they become payable though cash is Paid or not paid. Both transactions will be recorded in the accounting period to which they relate. Therefore, the accrual concept makes a distinction between the accrual receipt 📜 of cash 🤑 and the right to receive cash 🤑 as regards revenue and actual payment of cash and obligation to pay cash as regards expenses. 

              The accrual concept under accounting assumes that revenue is realised at the time of sale of  goods or services irrespective of the fact when the cash is received. 

* For eg :- 

ABC LTD.  Sell goods for ₹ 1,00,000 on 20th march 2020 and the payment is not received until 20 June 2020, the payment is due and payable to the firm on the date of sale I.e. 20 march 2020. It must be included in the revenue for the year ending 31st march 2020. Similarly, expenses are recognised at the time services provided, irrespective of the fact when actual payment for these services are made. For eg : in the firm received goods costing ₹ 50,000 on 28th March 2020 but the payment is made on 5th april 2020 the accrual concept requires that expenses must be recorded for the year ending 31st march 2020 although no payment has been made until 31st March 2020 though the services has been received and the person to whome the payment should have been made os shown as creditor. 

In brief, accrual concept requires that revenue is recognised when realised and expenses are recognised when they become due and payable without regard to the time of cash receipt 📜 or cash payment.

* Importance of accrual concept :

• It helps in knowing actual expenses and actual income during a particular time period .
• It helps in calculating the net profit the business. 

* Difference between accrual and deferral concept of accounting :

Accrual accounting gives the option of earning revenue you can add to financial statements, but there is no proof of payment during the accounting period. On the other hand, a deferral puts a higher priority on showing that you can make payments in the same accounting period for the expense you incurred. 

★Remaining 1 or final concept discuss in 26th blog....★ 

                                      
                                So wait my 26th blog....★

     

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