Accrual (from its Latin root – ‘accrescere’, literally meaning, “…to grow or increase”) refers to income or expenses that a business incurs, regardless of when the exchange of cash occurs.
Accruals stem from accrual accounting methodology.
This type of accounting accepts credit as an equally worthy basis of a transaction to cash and doesn’t require the actual delivery of cash as a prerequisite to writing up income or expense in the ledger.
An item of accrual would indicate a transaction that has led to either money coming in or going out of your business and could yet still be unrealised in terms of cash changing hands.
According to accrual accounting methodology – because of widespread economic dependence on credit, it is assumed as highly likely that the monies associated with the accrual will eventually materialise anyway.
Therefore, they are counted once an agreement has been made.