ACCRUAL BASIS OF ACCOUNTING Definition

ACCRUAL BASIS OF ACCOUNTING is wherein revenue and expenses are recorded in the period in which they are earned or incurred regardless of whether cash is received or disbursed in that period. This is the accounting basis that generally is required to be used in order to conform to generally accepted accounting principles (GAAP) in preparing financial statements for external users.

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NET PROFIT is the companys total earnings, reflecting revenues adjusted for costs of doing business, depreciation, interest, taxes and other expenses. Same as Net Income.

EXPLANATORY, in accounting, is a paragraph added to an audit report to explain something, such as the reason for a qualified or adverse opinion.

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