Accrual Basis

Adjustments at the Balance Date and Preparation of Sole Proprietorship Financial Statements

MS: Asas Akruan · EN: Accrual Basis · ZH: 权责发生制

Meaning

The accrual basis is an accounting basis that recognises revenue when it is earned and expenses when they are incurred, regardless of whether cash has been received or paid. It contrasts with the cash basis, which records a transaction only when money changes hands. The accrual basis is the main reason adjustments are needed at the balance date.

Example

Melur Grocery pays RM12,000 rent for 12 months, but only 10 months fall within the current financial year. Under the accrual basis, only RM10,000 is recognised as this year's rent expense, while RM2,000 is recorded as prepaid rent.

Source: DSKP KSSM Prinsip Perakaunan Tingkatan 4

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