The accrual basis accounting transaction is recorded when the expenses and revenues are earned. Therefore, the recording of revenues is done on the delivery of products or services before payment is made. The cash basis transaction is different in the sense that the recording of revenues is done after the products or services delivered are paid for. The difference between these two types of accounting transactions is the timing of payment. The accrual basis accounting recording method is applied in larger companies because it portrays the company's general performance. The accrual basis is more advantageous because it enables efficient tax reporting, auditing, and company profitability projections ( Morah, 2020 ).
Revenue recognition principle and expense recognition principle and the matching principle
According to the revenue recognition principle, revenues should be recorded when they are earned and not during collection and falls under the accrual basis of accounting concept ( Tuovila, 2020 ). On the other hand, the expense recognition principle identifies that expenses should be recorded during the collection of the revenues. According to the matching principle, expense and revenues should be recognized in the same period in which they are reported. Therefore, the matching principle follows the accrual basis accounting concept as it supports that transactions should be recorded at the time of reporting.
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Accrued revenue and describe the debits and credits and associated "accounts" and the links to financial statements.
Accrued revenue refers to sales recognized by the seller, which have not yet been billed factoring delays in revenue recognition. Accrued revenue is mostly used in the service industries where revenues may be delayed, pending the completion of set projects. This process is necessary for the process of matching the revenues with the expenses. The debit balance recorded in the accrued billing account is done on the balance sheet and is not recorded in cash basis accounting is done in the income statement. Therefore, accrued revenues are not recorded on financial statements when they are earned unless an adjusting entry is made to reflect a credit to the account. The monthly charge paid before the completion of the service that has been offered ( Tuovila, 2020 ).
References
Morah, C. (2020, March 7). Accrual Accounting vs. Cash Basis Accounting: What's the Difference? Retrieved from https://www.investopedia.com/ask/answers/09/accrual-accounting.asp
Tuovila, A. (2020, January 29). Accrued Revenue Definition. Retrieved from https://www.investopedia.com/terms/a/accrued-revenue.asp
Tuovila, A. (2020, January 29). Revenue Recognition Definition. Retrieved from https://www.investopedia.com/terms/r/revenuerecognition.asp
