Accrual accounting refers to the practice of tallying up revenues and costs when a transaction occurs rather than when cash changes hands.
Example
Let's say you pay for a new tattoo with a credit card. If Tattoo Joe uses the accrual method of accounting, he adds the money he charged you to his accounts before your Tylenol even wears off—even if MasterCard takes months to pay up.
The opposite of accrual accounting is cash accounting, where money is only counted when it changes hands. That means Tattoo Joe would only add the price of your tattoo to his coffers after MasterCard had actually transferred the money to his account.
Related or Semi-related Video
Finance: What is a Consolidated Balance ...3 Views
Finance a la shmoop what is a consolidated balance sheet? okay people
this is a tale of two balance sheets it was the best of times right here and all [Lemonade stand balance sheet appears]
that cash no debt,, yeah and it was the worst of times and pretty much the
opposite and then one magical mergy day the two companies possessing these
two divergent balance sheets decided to you know merge it was a lovely ceremony [Bride and groom holding hands]
the bride wore white the groom stepped on the glass so then the balance sheets
were consolidated that is they were merged or combined or fully brought
together liabilities plus liabilities assets plus assets so the few dollars in
cash here in the worst of times balance sheet
well that was tacked on to the cash in the best of times balance sheet and the
same happened with long term liabilities and short and eventually after the
wedding night was you know consummated these two balance sheets had merged and [Man and girl standing by their lemonade stands]
consolidated and looked like this and that's what happens when companies merge
everything including their balance sheets consolidate let's hope they
generate lots of tiny cash flows and credits in the future....Mazel Tov
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