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Definition and Examples of
Accruals
Explanation: Accruals in accounting refer to expenses and revenues that have been incurred or earned but have not yet been recorded through a transaction. This concept is part of accrual accounting, which records financial activities when they occur rather than when cash is exchanged.
Example: If your event planning business organizes an event in December but doesn’t get paid until January, the revenue is accrued in December.
Potential Issues: Inaccurate accruals can lead to misleading financial statements, affecting budgeting, forecasting, and strategic decision-making.