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Terms and Definitions

What is an accrual?

Updated: May 22, 2024

Accrual definition and meaning

An accrual is an asset or expense that accumulates over time — typically some sort of payment or benefit. From an accounting standpoint, accruals allow businesses to record revenue or an expense when a transaction occurs, but before payment is exchanged. It can be incoming revenue that hasn’t been collected or an outgoing expense that’s expected – and saved for – but not yet paid.

 

More about accruals

An accrual can also account for non-cash assets like time or liabilities. In the payroll world, paid time off accruals represent the number of days off an employee has earned. In accounting, accruals can include expenses you’ve incurred but haven’t been billed for yet as the month’s utilities.

For example, an expense accrual could be a bonus that an employee earned in 2021 but isn’t paid until 2022. Or a salesperson might close a new business deal but not receive the commission payment until the following quarter.

Using accrual in a sentence

“I need to check my vacation accrual before I buy this plane ticket.”

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