Accrual Accounting, Accrual Basis Accounting, Accrual Method
When revenues are earned and expenses incurred
An accounting method under which income is subject to tax after all events have occurred which fix the right to receive such income. Deductions are allowed when all the events have occurred to fix the obligation to pay the debt. For instance, we say that revenue is recognized when earned rather than when the resulting cash is colledted. Similarly, we would recognize an expense when incurred rather than when the required cash is paid.